Industrial Trends
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Market fundamentals continued to trend positively, exceeding expectations. The vacancy rate dropped to 3.5% from last quarter’s 3.9% and the average asking base rent increased by 6% to $7.90 PSF NNN and by 11% year over year. Interchange 8A of the NJ Turnpike has consistently out performed the rest of the state with its over 1MSF absorption each quarter for the last several years due to the rapid growth of e-commerce and demand for big box distribution centers. Currently there are only two facilities available over half a million square feet and one is 18’ clear located in Wayne and the other is located at 8A.
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The construction pipeline remains strong due to the lack of available space. Over 4MSF of new high cube space was delivered to the market this quarter, with an additional 8MSF under construction (of which half is already pre-leased).
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Some of the top leasing transactions that helped propel positive net absorption by 4.5MSF included Clutter.com’slease of 450,000 SF at Exit 8A and FREEZE’s 318,000 SF. Toys R Us vacated their Flanders 1.3MSF location, however it is speculated to be under contract with a user/investor known as the Saadia Group which should not affect the vacancy rate in Morris County. Saadia also purchased 473 Ridge Road and leased it back to the Seller, FREEZE, this quarter.
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The Port Authority of NY/NJ experienced a boom in activity. Total TEU volume was up in June year over year to 6.8 %. The total rail lifts also improved by 15%.
Retail Trends
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The amount of vacant sublease space in the Northern New Jersey Retail market has trended down over the past quarter. At the end of the 3Q2017, there was 284,448 SF of vacant sublease space. Currently, there are 277,244 SF vacant in the market, according to Costar reports.
Office Trends
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The office market received a stimulus from the EDA, and state incentives, which has helped increase leasing velocity to New Jersey (i.e. Integra Life Sciences Corporation and Teva Pharmaceuticals). In the Short Hills submarket at 830 Morris Turnpike, we witnessed a 27% decrease in its availability due to over 23KSF of newly completed deals within the quarter.
Economic Trends
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The US economic outlook remains healthy, according to most economic indicators. The NJ unemployment rate dropped to 4.3%. According to the Bureau of Economic Analysis, the GDP increased at a annual rate of 4.1% in the second quarter, due to positive contributions from personal consumption expenditures, exports, nonresidential fixed investments, federal government spending, and state and local government spending.
