3rd Quarter 2023

Industrial Trends

  • SUMMARY:  When comparing the growth patterns from 2019 to today, the NJ industrial market is trending on an upward path; however, year-over-year the trend isn’t as picturesque. After three years of sizzling hot rental increases and historic low vacancies driven by e-commerce fulfillment demand, the market is starting to cool off. Vacancy rates have risen, leasing activity has decreased, rents are up but stabilizing, the absorption rate has turned negative for the second straight quarter and growth for the majority of the 3PLs and logistics companies is slowing. With all that said, the New Jersey industrial dynamics remain tight. As the new construction pipeline starts to dry up, logistic demand and vacancy rates may gain their balance again.
  • VACANCY: Vacancies increased to 4.5% for Northern and Central New Jersey and 5.4% when including Southern New Jersey. The additional supply of new space and normalizing demand pushed the vacancy rates up to 4.5 %for northern and central NJ and 5.4% through all of NJ. The construction pipeline has started to contract.
  • OPTIMAL SIZE: 75,000 to 200,000 SF range.
  • PORT VOLUMES: Total import TEUs have decreased slightly over 21% year-over-year.
  • IOS: Monthly per acre rates have declined off their highs by over thirty-five percent, and vacancies have expanded with approximately 185 acres available in the port region.
    • Brookfield’s Metropolitan Logistics project is located in Elizabeth, NJ
      • includes two buildings ±103,912 SF and 196,087 SF
      • 40’ clearance
      • 84 trailer stalls
      • 53 Loading Docks

Office Trends

  • The office market may see more demand for flexible workspace solutions and more focus on employee wellbeing.
  • Integration of technology is in demand due to the impact of remote work and experts predict the recovery will take at least 10 years.

Retail Trends

  • Adaptive Reuse: Repurposing existing retail spaces for new types of businesses or experiences has been a growing trend.
  • Pop-up Shops and Short-Term Leases: Pop-up shops have gained popularity for retailers to test new markets or create unique shopping experiences.
  • Technology Integration: Technology plays a significant role in the retail industry.
  • Sustainability and Wellness: Consumers are increasingly valuing sustainable and wellness-focused brands.  
  • Flexible Lease Terms: Retailers seek more flexible lease terms to accommodate changing market conditions and uncertain economic times.

Multi-Family Trends

  • While Northern New Jersey is continuing to expand as a major pharmaceutical, medical, and Fintech hub,  new construction deliveries continue but at a slower pace as the near-term supply is expected to surpass normalizing apartment demand. This has been reflected in slightly lower units under construction and slightly increasing vacancy rates.
  • Conservative lending and high-interest rates continue to put a weight on multifamily deal flow. However, buyers and sellers are beginning to level their expectations which is reflected in an average cap rate rising to 5.8% from 5% in the previous quarter and the average market sale price / SF decreasing from $267k to $235k.

Economic Trends

  • US consumer spending (increased 0.7% in September) exits the 3Q on a strong note. Food and beverage was one of the leading outlays.
  • Personal income gains 0.3%; savings rate falls to 3.4%.
  • Core PCE price index rose 0/3%; up 3.7% year-on-year.
  • Monthly core inflation rose.