1st Quarter 2024

Industrial Trends

  • SUMMARY: Over 2MSF was delivered in the first quarter, slightly over 20% of which was pre-leased. Over 18MSF remains under construction for the state, 10MSF of which is located in the Northern & Central region. The number of future deliveries increased vacancy rates and placed pressure on rental rates in the quarter. To offset the lower rental rates as a reaction to the increased supply on the market, additional tenant improvement dollars and rent abatements were provided.
  • VACANCY: The vacancy rate has grown steadily and now sits at 6.2% mainly due to an increased amount of recently completed distribution centers and subleases available.
  • OPTIMAL SIZE: There has been increased activity for space on the smaller end 20,000 to 50,000 SF. Demand was strong in the range of 200,000 to 400,000 SF in the first quarter which contributed to absorption however a lot of the deals inked were 2023 transactions pushed over into the new year.
  • PORT VOLUMES: The recent collapse of the Francis Scott Key Bridge in Baltimore disrupted freight operations on the East Coast and is partly responsible for the surge in container volume at the ports. The NYNJ ports are up 11.7% YoY handling over 2M TEUs for March.
  • IOS: Monthly per acre rates have stabilized. Demand increased due to the FSK Bridge disruption increasing rents slightly however look for rents to be relatively flat for the remainder of the year.
  • NOTABLE PROJECTS:
    • Brookfield’s Metropolitan Logistics project located in Elizabeth, NJ
      • Includes two buildings (±103,912 SF and 196,087 SF)
      • Divisible by 50,000 SF
      • 40’ Clearance
      • 84 Trailer Stalls
      • 53 Loading Docks

Office Trends

  • Leasing activity declines to 2.2 million SF in Q1
  • Sublease space accounts for 17% of the total available space
  • Vacancy increase to 23.6%
  • Life Science and healthcare firms are active in Q1

Retail Trends

  • Landlords and retailers are continuing to collaborate on tenant improvements and creative lease renewals.
  • Interconnectivity of post COVID office vacancies effects on retail are being felt more in urban markets than suburban.
  • Class A offices continue with some form of hybrid work which caused the shopper pool to diminish, forcing retailers to reduce staff and/or inventory.
  • Vacancies in the Garden State ticked up as seasonal stores closed after the holidays; Q1 is also the time when failing retailers typically close.
  • The cost of labor continues to climb, forcing some retailers to reduce hours. This trend has affected high-end retailers such as Hermes, to staple retailers like Verizon.

Multi-Family Trends

  • Hundreds of new luxury units continue to flood the market, driven by robust renter demand in Northern New Jersey. However, record-level supply is pushing average occupancy below 95% for the first time since 2020.
  • With rent growth expected to continue and expectation that the Fed will begin to lower interest rates as early as July, it appears investors are waiting until market conditions improve in the second half of the year. Buyers and sellers are continuing to level their expectations which is reflected in an average cap rate continuing to rise and the average market sale price PSF continuing to decrease.

Economic Trends

  • The economic market is off to a strong start in 2024 due to the resilient labor market, strong consumer spending, above-average economic growth, productivity is rising in America, improving profit expectations, and the likelihood of rate cuts later this year.
  • Presidential election years tend to be volatile. Recent elections have been unpredictable, with the major parties being so polarized.