The New Jersey industrial market in the second quarter was mixed, with positive net absorption, tightening vacancy, and an increase in rental rates but a slowing in leasing activity. A limited supply of inventory curbed the amount of activity along with the economic concerns. The Federal Reserve should have inflation under control but the looming uncertainty pertaining to consumer spending, supply constraints, increasing wage growth, and potential recession slowed the market’s robust pace.
The net absorption was a positive year to date at 2MSF, and rental rates increased to $12.17 PSF NNN.
There were 2.4MSF of new deliveries in the second quarter of 2022; The Blau & Berg deal at 330 S Randolphville, Piscataway, pre-leased to GPS was one of its largest deliveries. Pre-leasing new construction slowed down, as approximately 45% were leased as opposed to 95% 12 months ago.
Strong cargo volumes at the Port Authority of NY/NJ continued with 3,173,496 total loads and 1,721,140 total empties of TEUs recorded in June. There were still multiple cargo ships at anchor – just under 6 days on average, up from the year-to-date average.
Suburban office leasing is outpacing urban, as the smaller office environment gains favor with employees looking for less congested, more individualized work settings that don’t require as much shared space, public transportation, and parking concerns. Everything that made urban office buildings attractive is working against them in the post covid environment.
Companies are opting to maintain small, auxiliary urban locations while expanding and/or moving to more substantial suburban office campuses. Some suburban complexes are slowly being converted to apartments or industrial projects.
Brick and Mortar big box retailers are fire-selling inventory to bring in cash, partially due to the inflationary influence of rising capital costs and inventory fluctuation due to supply chain issues. Retailers are feeling cash flow pressures with wage increases, while a continued lack of employees has resulted in overtime and understaffing.
Multifamily market in Northern New Jersey continues to have a solid performance due to corporate moves (such as Gilead expanding its footing in Morris County) and returning commuters.
With overall fundamentals improving, development activity is on the rise, especially along the Hudson waterfront and within Essex county.
Rent growth and investment activity have also continued to improve quarter over quarter.
Unemployment decreased to 3.9% in June from 4.2% in April
Retail sales in the US recorded their first decrease YTD
Inflation should be restrained by year-end; however, the debt markets have taken a beating over the last few months. Unemployment is expected to slow; however, wage growth continues to increase which will continue to put pressure on inflationary conditions.