Demand continues its sweltering pace for Class A big box facilities. Despite the slight increase in the overall vacancy rate to 3.75% (up by 0.17%), the sector delivered 2.3 MSF of new construction, average rental rate ticked up to $8.61 PSF (an increase of 9% year over year and 2% over the previous quarter this year). Absorption was also wide spread throughout the markets mainly due in part to leases being inked over the 100,000-SF mark.
We are still seeing growth within the sector, its consumer confidence, construction, manufacturing, income growth, retail sales and being able to finance inexpensively is still healthy. Interest rates should fall and the fed is moving quicker.
The major change in our economic outlook is our perspective of the yield curve which has inverted. Markets today and throughout the economic expansion are more globally integrated. Trade wars, Brexit, the troubles in Hong Kong have all rattled the business community in some way directly or indirectly and will be a threat to the consumer confidence. Business investment may turn negative in the next quarter.
Blackstone Group almost doubled their portfolio with the acquisitions of 179MSF from GLP for $18.7M and Colony Capital acquired $1.2B worth of assets from Hampshire Companies.
Retail sales remain stable however stores continue to close due to the demand for ecommerce/online shopping. Malls will continue to reinvent themselves with recreational/office uses.
The Northern NJ Office market remains stable despite a modest increase in the vacancy rate to 21.5%. Rental rates remained steady. Ironside Newark unveiled itself which added over 270,000 SF of Class A office space.
Multi-family market fundamentals are strong in the Northern and Central New Jersey markets. Vacancy rates increased slightly from previous quarter to 3.8%. Market rent per unit is up 2%. Under construction units decreased 17% from last quarter to 8,283, driven by developer concerns of an impending recession. Apartment absorption has remained strong and demand has consistently exceeded supply additions throughout this cycle.
According to the Bureau of Labor Statistics, the unemployment rate was at 3.7% as of June, 2019, average hourly earnings at $27.91, consumer price index 0.1 and employment cost index at 0.6 for the quarter.