3rd Quarter 2018

Industrial Trends

  • Market fundamentals continued to trend positively for industrial real estate due to the continued demand for ecommerce and strong port activity. The vacancy rate decreased to 3.38% and the average asking base rent increased to $8.04 PSF NNN, which is up 11% year over year and up 44% compared to rental rates 5 years ago. Year to date, Northern and Central NJ had close to 12MSF of positive net absorption with Middlesex county outpacing the rest of the state with over 6MSF YTD.
  • There were 2.2MSF of deliveries this quarter, however the construction pipeline remains strong with 8MSF still under construction and over 48% of which has been pre-leased. Several larger development projects are from Russo Development, Greek Development and Morris Companies.
  • Some of the top leasing transactions included East Coast Warehouse’s 238,000-SF lease in Bayonne, Article’s 340,000-SF lease in Jersey City, XPO Logistics’ 526,000-SF lease and WB Mason’s 416,000-SF lease deal at Exit 8A and The RealRealInc.’s 492,000-SF lease.
  • The largest transactions PSF for the year to date were the Goodman Birtcheracquisition of Amazon’s 698 Route 46 for $149M ($242 PSF), DCT portfolio sale to Prologis for $98.5M ($121.68 PSF), and the Toys R Us 1.4MSF distribution center in Flanders sold for $90M.
  • The Port Authority of NY/NJ witnessed a 5.2% increase in total TEUs year over year at the end of September. The total rail lifts also improved by 20.4%.
Retail Trends
  • Tenants moving out of large blocks of space in 2018 include: JCPenney moving out of 182,909 SF at 502 Garden State Plaza and Kmart moving out of 131,567 SF at 321 State Route 440. Tenants moving into space include: At Home expanding into 82,149 SF at 77 WillowbrookBlvd and Target moving into 65,106 SF at 1099 Route 46.
Office Trends
  • Strong demand continues for the Short Hills and transit-oriented markets. Close to 2MSF of positive absorption marks the highest rate office has seen in years. A few of the largest transactions include E-Trade’s 132,000 SF, Alvogen’s84,000 SF and Teva Pharmaceuticals who inked 345,000 SF in Parsippany this quarter.
Multi-Family Trends
  • Multi-family market fundamentals continue to trend positively. Vacancy rates decreased to 3.5%; down from 3.6% in the previous quarter. Market rent per unit is up 2.5%. Northern NJ market seeing increase in demand due to renters getting priced out of New York City and looking for more affordable rents close to transportation. Under construction units reached 6,066 this quarter, up 1,010 units from last quarter. Developers are focusing on areas such as Newark, Montclair, and Bloomfield which provide cheaper alternatives to NYC and Hudson markets.

Economic Trends

  • The US economy grew at a 3.5% pace in the 3rd quarter according to the Bureau of Labor Statistics and remained heathy as the NJ unemployment rate remained steady at 4.2%. According to Deloitte Insights, they reduced their 2019 growth projection to reflect both the potential impact of the US tariffs imposed and the impact of US trade partners’ retaliatory measures.