The flight to quality is set to accelerate. As tenants chase modern, efficient space, Class A vacancy will keep tightening, especially along the core New Jersey Turnpike corridors. This dynamic is gradually shifting leverage back toward landlords in supply-constrained submarkets. Tertiary markets will remain more tenant-friendly due to the increased availability and product still in the pipeline. Leasing momentum should hold steady, supported by persistent demand for modern warehouse and distribution facilities. Class A assets are expected to outperform older inventory, while non-Class A properties may continue facing occupancy challenges. Industrial rent growth is likely to remain stable.
The rest of 2026 looks cautiously optimistic; demand for modern logistics space should remain solid, bolstered by the Port of New York and New Jersey’s strength, but broader economic caution could keep tenants selective. With construction tapering and sublease space shrinking, vacancy should trend lower, and rents should stabilize, especially for Class A product. Expect continued flight-to-quality, with the Port and Exit 8A remaining the hottest spots for the remainder of the year.
By the end of 2025, the sector appears ready to stabilize, with empty spaces possibly hitting their peak shortly before dropping as project backlogs dwindle and interest surges in vital areas like urban-edge and updated facilities. Strong core elements, from vibrant buyer demographics and superior transport links, including the port’s robust performance, to a firm U.S. economy and advantages from reshoring, pave the way for tempered progress in 2026, particularly if tariff clarifications reduce doubts and encourage additional commitments, even as labor constraints and international dynamics might moderate the speed.
In Q3 2025, New Jersey’s industrial market stabilized and began recovering after prolonged oversupply pressures. Demand surged, driven by 3PL providers and large occupiers targeting Class A space, yielding the state’s first positive net absorption in over a year. Leasing velocity rose sharply quarter-over-quarter, while construction deliveries slowed significantly, easing availability. Investment sales remained subdued year-to-date, and rental rates held steady amid occupancy-focused pricing. Fundamentals are tightening, especially in premium assets along the Turnpike corridor, reinforcing New Jersey’s role as a resilient logistics hub.
In Q2 2025, New Jersey’s industrial market revealed a dynamic landscape, with nearly 7 million square feet leased, but 4 million square feet returning to the market led to negative absorption for the ninth quarter in a row. Class A properties thrived thanks to strong demand for new spaces, even as overall vacancy rates ticked up and construction hit a five-year low of 9.2 million square feet. The first half of the year saw over 18 million square feet leased—the highest since 2021—driven by a surge in large-scale transactions, especially around Exit 12. Despite these positive trends, some landlords opted to focus on occupancy rather than maximizing rents, contributing to a decline in overall asking rents.
The NJ industrial market navigated a tumultuous 2024, characterized by a substantial influx of new supply and a resurgence in tenant demand toward year-end. Over 12 million square feet (MSF) of new space was delivered, resulting in 5 MSF of negative net absorption and a vacancy rate of 7.5%—the highest in over a decade. However, following the presidential election, tenant demand surged, culminating in the highest leasing activity since the pandemic, with over twenty leases exceeding 250,000 SF. Notably, the Exit 7A/8 and Port submarkets exhibited signs of recovery.
A resurgence in leasing activity, rising vacancy rates, stabilized rental rates, and additional new deliveries have increased tenant leverage within the market. Increased port activity resulted in sustained demand, with over 7MSF of leasing activity recorded. The Class A space accounted for over 40% of the 7MSF. Eight new leases exceeding 200,000 SF were inked in the quarter.
Tenant demand normalized following the pandemic and as a result of additional deliveries, high interest rates, and slower consumer consumption the vacancy rates have increased pushing rental rates downward. The leasing velocity exhibited some resiliency stimulated by 3PLs, food and beverage companies, and an influx of Asian logistic firms. Over 14 notable deals, over 175,000 SF, were completed in the first half, a significant increase over the last year.
The economic market is off to a strong start in 2024 due to the resilient labor market, strong consumer spending, above-average economic growth, productivity is rising in America, improving profit expectations, and the likelihood of rate cuts later this year. Presidential election years tend to be volatile. Recent elections have been unpredictable, with the major parties being so polarized.
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.
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.
The second quarter of 2023 witnessed a decline in cargo volume due to additional pullback from retailers with an oversupply of inventory currently warehoused. Despite the cooling economy, investors still have an appetite for real estate but at reduced prices from their highs of 2022.
The first quarter of 2023 witnessed some pullback from investors, warehouse tenants, and outdoor storage companies. Most investors have been sitting on the sideline waiting for the Fed to stabilize inflation and flatten the interest rate increases. The banking crisis of SVB, Signature Bank, Credit Suisse, and First Republic has many lenders concerned and will cause tightened borrowing standards. Despite the cooling economy, there are certain investment companies with an appetite for real estate but at reduced prices from their highs of 2022.
The New Jersey industrial market fundamentals have seen a slowdown, largely due to monetary policy. Interest rates were raised to subdue inflation, making debt more expensive to investors. Initial indications of a cooldown became visible in the fourth quarter as leasing activity slowed. 2022 saw over 10MSF of net absorption. Vacancy availability ticked upward to 3.1% as the availability rate increased to a pre-pandemic region of ±4.35%.
Economic Trends | Unemployment decreased to 3.9% in June from 4.2% in April. Retail sales in the US recorded their first decrease YTD. Inflation will not be restrained by year-end; interest rates will continue their rise. The debt markets are expected to be punished over the next few quarters. Unemployment is also expected to increase over the next few quarters.