Economy
- Despite global economic, political and financial uncertainty, unemployment has remained buoyed hovering around the 5% mark. Trade, Transportation, Utilities and Construction employment grew, contributing to healthy consumer spending and confidence. The US Manufacturing sector rebounded according to the Institute of Supply Management (51.5 PMI).
Retail
- Ecommerce growth due to online sales has at a price for retailers operating only bricks and mortar. Online sales have increased over 16% year over year while total retail sales increased only 2.3% in that same period. Several closings such as Walmart (150 locations), Sears (78 Kmarts/Sears) and Macy’s (+/-100 locations) are feeling the pressure from online shopping. Changing consumer habits have pushed retailers to downsize. There is little doubt that online shopping has enormous potential however that does not translate to lack of a physical presence – it may just mean a demand for smaller spaces. “‘Click and collect’is vital to retailers’ online survival. It can protect margins from the huge cost of online orders by eliminating the last mile to someone’s door,” said Michelle Grant, Head of Retailing for Euromonitor International.
Office
- The New Jersey Office market absorbed an unexpected amount of SF this quarter. Strong demand and higher rates continue in the Hudson Waterfront area. The Short Hills market also continues to see additional absorption and a strategic option for companies looking for excellent facilities offering amenities convenient to executive housing with good school systems in place.
- Close to eighty percent of the state’s office facilities were built in the 1980’s with amenities that are either obsolete or inadequate to today’s tenant requirements. The revitalization of some of those facilities (new HVAC, better parking ratio’s) and/or the demolition of some of those facilities will help keep the vacancy rate down.
Industrial
- Demand has propelled to dizzying heights as quality space has dissipated,helping this market to be one of the strongest we’ve seen in the past thirty years. Key indicators of this strong market have been e-commerce and the food industry. The vacancy rate is 5.4%, as demand continues to outpace supply aided by a disciplined speculative development approach despite having over 5.6MSF under construction -half of which was under construction at the height of the last cycle in 2007.
- Amazon expanded its presence by 600,000 SF and is in talks to assume another 1MSF which would make their total portfolio in NJ +/-7MSF. Exit 8A continues its strong demand as rents have reached the mid $5 PSF NNN range and the area has a 3.8% vacancy.
