FLORHAM PARK, NJ – After a sluggish first quarter, the New Jersey industrial market rebounded, with leasing activity increasing 20%, according to a report released by Transwestern Commercial Services.
The brokerage company's second-quarter report finds that strong leasing activity improved the state's vacancy rate to a historic low of 3.6% in the second quarter. This was the fifth quarter in a row that the state's vacancy rate was below 4%.
The strong demand for tenants has also led to an increase in rents. The average total rent rose by 7.8% compared to the previous year, including 10 sub-markets in which rent increases of more than 10% were recorded during this period.
In the second quarter of 2019, more than 20 leases covering more than 100,000 square meters were signed in the New Jersey industrial market. Four of the six key leases were signed in the New Jersey Turnpike Exit 8A submarket, which accounted for more than 30% of the total market positive absorption for the quarter.
The largest transactions continue to be made by e-commerce retailers along the Turnpike Corridor. However, activities are gradually expanding to submarkets further west, particularly Route 46/23/3, Fairfield and Morris East submarkets, with leasing in non-turnpike submarkets accounting for 27% of total net absorption [transwestern states] in the report.
"As the best product becomes scarce in the main corridors, corporate tenants are expanding their geographic parameters to find more options," said Lori Zuck, General Manager at Transwestern. "However, these secondary sub-markets have also tightened and rental prices have increased by 25% to 35% in recent years."
Manufacturing continues to be a driving force in the industrial market. Tenants in this industry have amassed positive absorption of nearly 4 million square feet over the past five years, causing vacancies in this sector to drop from 6% to 3.4%.
Leasing west of the turnpike was dominated by the manufacturing industry. The food and chemical manufacturer Corbion signed a new lease on the Route 46/23/3 submarket with an area of 391,515 square meters, which is planned for autumn this year.
In addition, nutritional and functional food maker Vitaquest International signed a 200,000 square foot lease in the Morris East submarket, and food and beverage maker Karat by Lollicup announced plans to move its New Jersey operations to a 190,000 square foot facility in Somerset Submarket.
"As consumer spending continues to surge and product spill over the coast, the Port of New York and New Jersey continue to break annual records and rise to second place in total in the country," said Matthew Dolly, New Jersey director of research at TCS. "With industrial growth showing no sign of slowing across the state and new builds being at their lowest level in three years, the need for high quality products in the market is driving infill development."