The industrial market in Northern New Jersey remains fundamentally strong. It continues its remarkable run, albeit slightly slower than previous quarters. Even though net absorption was positive 761,252, it was the lowest positive amount of square footage absorbed since the first quarter of 2014. Average asking rental rates continued their surge upward to $8.40 PSF NNN, a 3% increase from the previous quarter, 13% increase year over year, and a 42% increase over the last five years.
Big box leasing (Ecommerce and 3PLs) absorbed the majority of the space along the NJ Turnpike, however due to the amount of speculative new construction delivered, the vacancy rate ticked upward slightly to 3.57%. Ecommerce sales continued their surge with $137.7B, an increase of 3.6% from the fourth quarter (12.4% year over year), according to the Census Bureau of the Department of Commerce. Total retail sales were unchanged. Wayfair signed a lease just under 1MSF, and upon completion it will occupy over 3MSF in total at Interchange 8A. Over 5.8MSF was under construction in the quarter, with over 2.3MSF delivered to the market.
According to the Port Authority of NY/NJ, during January 2019, the Port handled more than 622,000 TEUs, the most ever for a month of January, and the fifth highest total for any month in the port’s history. The recorded cargo volume handled upholds the port as the busiest on the East Coast, and the third busiest in the Nation, following Los Angeles and Long Beach. The cargo growth was bolstered by a 5.9 percent increase in imported goods. In addition to cargo containers, the port also set a new January record for cargo handled by rail, moving 54,705 containers, up 8.8 percent over the previous record set in 2018.
High incomes and educational attainment help stabilize Northern NJ’s retail fundamentals, according to CoStar. Slow and steady growth has been a theme of the metro’s performance this cycle. Rent growth has faltered over the recovery, with rents consistently underperforming the National Index since 2012.
The vacancy trend continues downward in the low 21% but slightly elevated above last cycle’s average. Vacancies have compressed further this year, thanks to strong demand. Occupancies have also been helped by conversation and demolition projects that have removed obsolete inventory and turned them into industrial projects, such as the ones in Lyndhurst.
Multi-family market fundamentals are strong in the Northern and Central New Jersey markets. Vacancy rates decreased 0.1% from previous quarter to 3.5%. Market rent per unit is up 2.1%. Under construction units reached 10,481 this quarter, up 1,081 units from last quarter. Apartment absorption has remained strong and demand has consistently exceeded supply additions throughout this cycle.
Governor Murphy will gradually raise the New Jersey minimum wage to $15.00 per hour by 2024. The first hourly wage hike will be this July from $8.85 to $10.00. The updated family leave act will take in effect in July 2020.