2021 ended as one of the strongest years in the history of the New Jersey industrial marketplace. Key fundamentals such as absorption percentage, leasing velocity, rental rates and construction activity have all reached unprecedented levels.. The limited amount of space is due to the record-setting demand created by same day delivery logistics escalating rental growth, causing the requisite for new construction of distribution centers along the New Jersey Turnpike and tertiary markets.
Lack of class A & B product throughout the state has generated a frenzy to locate space due to logistic companies’ ecommerce expansion – pushing rental growth 41 bps beyond its Q3 2021 placement. Average asking rental rates for class A space increased to $17.75 PSF NNN and for all classes upwards of $11.13 PSF NNN. Leasing activity has been consistently strong which is contributing to the new supply of industrial space. The Meadowlands market has seen rental rates enter the $20 PSF NNN range for high cube space. The Blau & Berg Company will be bringing to market a +/-331,000 SF new distribution center in the port district with current guidance of $25 PSF NNN. Other markets such as Exit 8A have exceeded $12.50 PSF NNN, Exit 12 – $18 PSF NNN and Exit 10 – $16 PSF NNN.
Tenants have experienced sticker shock when looking for additional space and renewals in these tight conditions pushing them to alternative submarkets. Development and demand within secondary markets and tertiary markets has rapidly expanded.
Supply chain disruptions, shortage of raw materials and lack of commodities have lingered from the pandemic putting pressure on trade and the transportation sectors, but the economic recovery continues to propel the Industrial market to new heights.
Overall vacancy rate continues to climb, surpassing 26%.
New variants will continue to place constraints on back-to-office workloads.
Leasing activity increased in 2021 from 2020, due in part to Vaccinations
Demand for green buildings will continue to grow, as does Charging Stations for EV.
Short Hills, Summit regions, and suburban Morris County are some of the most sought-after areas for space from Manhattanites.
The overall availability rate increased by 10 basis points in Q4 to 6.6% largely driven by traditional mall tenants exploring new formats for expansion
Net absorption of 558 thousand SF marked the second consecutive quarter of positive demand. This is mainly due to Northern New Jersey market benefiting from a highly educated population, high median income and proximity to the country’s largest metro, New York.
Overall inventory units slightly increased mainly due to an increase in newly constructed units as cost of construction materials continue to remain high. However, despite high costs of materials, there are no signs of a slow down in new construction as demand is expected to continue to grow as Manhattan offices are slowly planning on reopening to a higher extent.