2nd Quarter 2023

Industrial Trends

  • SUMMARY: The second quarter of 2023 witnessed a decline in cargo volume due to additional pullback from retailers with an oversupply of inventory currently warehoused. Despite the cooling economy, investors still have an appetite for real estate but at reduced prices from their highs of 2022.
  • NEGATIVE NET ABSORPTION: Overall, the absorption rate turned negative by 3.5MSF for the first time in ten years.
  • RENT GROWTH: Rent continued to grow despite the increased sublease space added to the market. Expect rental rates to stabilize as additional inventory continues to be added to the market.
  • VACANCY: Vacancies increased to 3.% for Northern and Central New Jersey and up to 3.5% when including the Southern portion of New Jersey.
  • PORT VOLUMES: NY-NJ Port container volume increased to 3.7M total TEUs, down 23.7% from its June 2022 mark, however up 7.6% from June 2019 pre-pandemic level. Retailers have scaled back with a surplus of inventory.
  • IOS: Decreased port activity has put considerable strain on the IOS market. Leasing rates are off from their highs in 2022 by close to twenty percent.
    • 886,826 SF at Prospect Plains Road to LVMH Group
    • 321,765 SF at W Edgar Road to Coda Logistics
    • 495,212 SF at W Linden Avenue to Fresh Realm
    • Brookfield’s Metropolitan Logistics project located in Elizabeth, NJ
      • includes a ±103,912 SF and 196,087 SF

Office Trends

  • Demand for office space in suburban areas may continue to increase as more companies adopt hybrid work models and prioritize larger, more flexible office spaces.
  • The use of technology in real estate transactions will trend up and continue to increase, with virtual tours, online leasing agreements, and remote communication becoming more common.

Retail Trends

  • Increased demand for experiential retail: Consumers are looking for unique and interactive experiences when they shop.
  • Focus on sustainability: Many retailers and commercial landlords in New Jersey are focused on sustainability and are implementing green building practices and technologies to reduce their environmental impact.

Multi-Family Trends

  • Northern New Jersey started off the year on a strong footing as vacancy rates continue at record lows, and gross deliveries, asking rents, and asset pricing are at record high levels. Overall strong occupancies are supporting rent growth which continues to increase per quarter. While we witnessed many investors rushing to get into the market before interest rate hikes in 2022, we are now seeing the volume of multifamily investments slowly ease.

Economic Trends

  • Despite the most aggressive rate hikes since the 1980s over the past 15 months, a recession does not seem imminent.
  • The Federal Fund Rate changed +25 bps (expect another hike in early 3Q23 to tame inflation). Higher interest rates have a lagged effect, but the impact can already be seen in areas such as tightening banks, rising payments in credit card debt, auto loans, commercial mortgage payments, and corporate debt.
  • Retail spending was up modestly – rose 0.2% from May to June.
  • Unemployment raised to 3.7% in NJ.