Industrial Trends
- Market fundamentals continued to have an upward trend for industrial real estate. The vacancy rate decreased to 3% and the average asking base rent increased to $8.18 PSF NNN, which is up 12% year over year ($0.87 PSF and up 43%) and compared to rental rates of $2.47 PSF five years ago. Year to date Northern and Central NJ, had 17.8MSF of positive net absorption. The shortage of distribution centers throughout the state may slow the leasing velocity in the upcoming quarters, however demand for space continues to outpace deliveries.
- There were 1.5MSF of deliveries this quarter, however the construction pipeline remains strong with 7MSF still under construction and over 40% of which has been pre-leased. Several larger development projects from Russo Development, Greek Development and Morris Companies have yet to start construction, however Bridge Development has commenced on its 3.8MSF project off Interstate 78 in Phillipsburg.
- Some of the top leasing transactions included ReFrig-It 140,000-SF lease in Newark, Gilberts 327,000-SF in Keasbey, XPO Logistics renewal of 125,000 SF and Gucci’s 427,000 SF.
- The largest transactions for the year was the purchase of Brookfield’s IDI Logistics portfolio from Ivanhoe Cambridge for $3.7B.
- The Port Authority of NY/NJ is raising cranes, planning new dredging and looking to improve the navigational efficiency through its main channels and witnessed year over year, an 7% increase in total TEUs, along with an increase of 13.8% increase in total rail lifts.
Retail Trends
- Retail absorption was strong this quarter. At Home moved into its new space at 1930 Route 88 and 82,149 SF at 77 Willowbrook Boulevard. Target moved into 65,106 SF at 1099 Route 46 as part of their small format storefronts, according to Costar.
Office Trends
- Incentives continue to serve as a catalyst for expansion. Positive momentum helps record over a 1MSF of absorption. A few of the largest transactions include TD Ameritrade’s 207,000 SF, First Data’s 80,000 SF and Jacobs Engineering’s 43,000 SF.
Multi-Family Trends
- Multi-family market fundamentals are strong in the Northern and Central New Jersey markets.
- Vacancy rates remained unchanged from the previous quarter at 3.5%. Market rent per unit is up 2.3%.
- Under construction units reached 7,572 this quarter, up 1,506 units from last quarter. Construction starts have been increasing by approximately 20% quarter over quarter for the second half of 2018, as developers are still finding demand for apartments in the Essex and Hudson County markets.
Economic Trends
- Recent economic data has been mixed. The GDP slowed slightly, however remained the second highest reading in four years, mainly due to the healthy consumer. Wages have gained 3% and benefits have not grown significantly in real terms. As far as the Labor force, the baby boomers will soon be looking to retire which may pull down the work force numbers. Many people have been talking about a recession and expect pull back in 2020, however trade tariffs and other global economic activity could alter that timing.
