4th Quarter 2023

Industrial Trends

  • SUMMARY: Activity in the logistics sector decelerated in the year, however additional leasing within the industrial market in the fourth quarter may provide confidence going into the new year. The average rental rate continued to increase to $14.93 PSF NNN for all warehouse classes and the rate for Class A DCs fell to $24 PSF NNN. Absorption for the year turned negative (4MSF). There were twelve transactions completed over 200,000 SF but the majority of the deals over 100,000 SF were renewals/subleases with retail/wholesale occupiers being the most active. Despite softening fundamentals, long-term drivers remain intact.
  • CONSTRUCTION: There were over 20MSF deliveries at year-end; record-breaking numbers, of which 25% were pre-leased, down from 89% in 2022. 9MSF are still in the pipeline under construction which will push vacancy rates upward. A reduced development pipeline (lowest levels since Q320) should assist the market in the latter half of the year and into 2025.
  • VACANCY: Vacancy rate increased to 5.4%
  • OPTIMAL SIZE: 50,000 to 200,000 SF range.
  • PORT VOLUMES: Despite the total TEUs at the NJ NY ports, the tempered demand is still 1.97% above 2019 levels, drayage companies have felt the 11% decrease year over year but the main issue is that a lot of the product coming into the NJ ports are going out on rail not on chassis.
  • IOS: Monthly per acre rates have stabilized off 40% from the highs of 2Q22.
  • NOTABLE PROJECT:
    • Brookfield’s Metropolitan Logistics project located in Elizabeth, NJ
      • includes two buildings ±103,912 SF and 196,087 SF
      • 40’ Clearance
      • 84 Trailer Stalls
      • 53 Loading Docks

Office Trends

  • Leasing activity increases to 2.4 million SF in Q4
  • Vacancy dropped 10 basis points to 22.6%
  • Class A space remains in high demand
  • Additional SF added to the redevelopment pipeline

Retail Trends

  • Strong 4th quarter GDP growth (3.3%) and continued consumer spending bodes well for retail in 2024
  • Continued progress towards curbing inflation saw the headline rate reduce to 1.7% in Q4 while personal consumption spending increased to 2.8 in Q4 as the economy continues to outperform many economists worst case scenarios and shows signs of a “soft landing”
  • The labor force remains strong, which, combined with a deceleration in goods pricing, resulted in increased recreational spending
  • 47% of retails have plans to further establish their retail footprint in 2024 which will shift the focus from store closings to store openings
  • Cannabis will exceed 1 Billion in sales in 2024, and continue to soak up retail space where allowed

Multi-Family Trends

  • With high home prices, low housing supply, above-average property taxes, and inflation concerns, the Northern New Jersey rental market continues to be one of the most competitive rental markets
  • 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
  • Sales volume declined largely tracking the slowdown in rent growth which pushed institutional investors to the sidelines. Buyers and sellers are continuing to level their expectations which is reflected in an average cap rate rising to 6.0%  and the average market sale price slightly decreasing

Economic Trends

  • The Fed has considered cutting the rate in 2024 if inflation is getting anchored around the 2% mark. Spending, and personal income, have risen. Consumer confidence showed optimism as inflation moderates
  • The healthy labor market, cooling inflation, and steady wage gains helped the US economy defy most of the economists’ expectations for a recession