Industrial Trends
- The Covid-19 vaccination has helped fuel the market’s expansion and brought us back to some sort of normalcy. In less than a year, oil prices have soared, the stock market has risen, and consumer confidence has provided much boom. However, the eviction moratoriums, withdrawal of government handouts, and inflationary costs are something to keep an eye on in the next few quarters.
- Consumer confidence jumped to its highest level (reading of 127.3 according to Reuters) as the growing labor market optimism offsets concerns about higher inflation.
- The pandemic has shifted consumers’ buying habits, which has increased the growth of ecommerce purchases. This, in turn, has created a race to find and lease high cube distribution centers, particularly along the New Jersey Turnpike. Leasing activity increased and reached over 30MSF, as Class A space remained the most sought-after property type in the industrial sector. According to the National Retail Federation, online sales are expected to grow between 18% and 23% this year over 2020.
- Net Absorption remained steady with another 5.4MSF of net occupancy gains recorded; many due to preleased construction deliveries.
- Demand for warehouse space remained robust in the second quarter; the appetite for warehouse space by 3PL, logistics, ecommerce, and consumer good companies has not waivered.
- Strong performance at the New York-New Jersey Port, pertaining to import volumes. Year-to-date cargo has surpassed that of last year by 48.2% with 3.6M TEUs handled, led by the surge in imports which were up 28.4% YOY.
- Construction pipeline remains healthy with 40MSF proposed through 2024.
- Those deliveries slowed throughout the second quarter but should exceed 12MSF by the end of the year.
- NJ has continued to attract institutional capital driven by climbing rents and historically low-interest rates but is faced with fierce competition in his red-hot market.
Office Trends
- Office rents have continued to press downward, as tenants have shed space.
- The office market will continue to slide as some portion of the workforce will work from home/remotely.
- We continue to see larger vacant or partially vacant office buildings trading well below $40 per square foot.
Retail Trends
- Retail is continuing to show signs of recovery as more retail stores continue to re-open their doors and new businesses are opening.
- Although e-commerce has been leading the growth through the pandemic, such growth rate is unsustainable over the long-term mainly due to the operational and profitability limitations around shipping and logistics.
- New retail concepts will absorb some of the vacancies
Multi-Family Trends
- Multifamily has suffered through the pandemic as many owners lost rental income.
- Rents in Northern New Jersey have increased 4.8% in the past 12 months and investment activity continues to remain steady through 2021.
- The supply in Northern New Jersey is showing no signs of abatement.
Economic Trends
- GDP growth is expected to surge to 6.4% in 2021. In the first quarter, government assistance payments, such as direct economic impact payments, expanded unemployment benefits, and Paycheck Protection Program loans were distributed to households and businesses through the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act according to BEA.
- A sign of confidence that the world’s largest economy remains confident that it will pull through the pandemic better than others is that foreign investors have been pouring money into US assets.
