The US economy grew at a modest pace of 1.9% according to the Bureau of Economic Analysis. It reflected an increase in consumer spending, investment and local/state spending. For the year 2016, GDP increased 1.6% compared with 2.6% in 2015.
Soaring web sales increased over 14% year over year compared to a 4% increases for retail sales overall. Amazon doubled its deliveries for Third-Party Sellers in 2016.
US Factory activity finished the year with its strongest growth in two years. The Institute for Supply Management stated its index rose to 54.7 in December from 53.2 in November. Any reading over 50 stands for expansion in the manufacturing sector.
Rates remained relatively stable however with the online sales continue to take a chunk of its profits it will be interesting to see how the big box retailers scale down. Limited to close, JC Penny complaining of declining foot traffic etc.
According to Costar, The largest lease signings occurring in 2016 included: the 180,000-SF lease signed by Big SNOW America at American Dream Meadowlands, the 72,000-SF lease signed by Floor & Decor at Richmond Plaza; and the 65,000-SF lease signed by Topgolf at 939 US Highway 1.
Tenants continue to relocate to quality facilities as rates remain relatively below the historic average. The Hudson Waterfront and Newark downtown area will see an uptick in its availability rate with large blocks of space coming to market. The Short Hills and Summit region continue its hot leasing activity well below the state vacancy average of 20%.
Market fundamentals continue to be healthy; overall total net absorption for the year was over 11.6MSF (Year over year positive 2.9MSF). The vacancy end of the year 180 basis points lower than 4Q15 @ 5% and the leasing rates continue to climb to $6.50 PSF NNN putting additional pressure on 3PL and warehouse users to compete for the Big Box Distribution Centers. Average sale price rose to $96 PSF. The Meadowlands region continued to be the most active of Northern and Central NJ with a 4.8% vacancy from 7.2% 4Q15.
Demand for Big-Box DC’s has ramped up construction schedules and its speculative development with over 11MSF currently under construction. In the previous quarters, new construction has been somewhat disciplined.
This cycle is going on 9 years – two years longer than the average cycle.