Continued historic industrial market fundamentals and measurable office sector improvement translated to robust overall third-quarter performance for New Jersey commercial real estate, according to Colliers International NJ LLC (NASDAQ:CIGI, TSX:CIG). The global commercial real estate services firm today released its latest regional Market Snapshots.
Record-setting demand and consistent positive net absorption have yielded historically low industrial availability in Northern and Central New Jersey, with the availability rate dropping 20 basis points during the third quarter to just 6.3 percent.
“This demand in conjunction with new class A properties that have been recently developed has pushed industrial asking rents in our region to new levels,” noted David A. Simon, SIOR, executive managing director and New Jersey market leader. “New Jersey’s industrial average asking rent today is $7.13 per square foot, which is 15.4 percent higher than this time last year.
“At the same time, while activity remains strong, the shortage of existing available inventory has made it difficult for industrial users to find new locations and the result of limited inventory has led to less transactions being completed. In fact, quarterly industrial leasing activity dropped below 10 million square feet, to 9.1 million square feet, for the first time since third-quarter 2015,” Simon added.
Still, several significant transactions closed, led by Wayfair’s 1.3 million-square-foot commitment at 1 Brick Yard Road in Cranbury, Rema Foods’ 320,867-square-foot lease at 2353 Route 130 in Dayton and RAB Lighting’s 264,085-square-foot lease at10 Broadway Road in Cranbury.
Diminishing available space has led developers to accelerate their development pipeline, according to the Colliers report. During the quarter, 10 projects totaling 2.6 MSF broke ground, bringing the total construction pipeline to 43 properties totaling 15.0 MSF.
Market by market:
Northern New Jersey maintained its positive momentum for the fifteenth consecutive quarter, absorbing 1.3 million square feet of industrial space, lowering the availability rate to 7.0 percent – an improvement of 100 bps from the prior year. At 4.1 million square feet, Northern New Jersey industrial leasing remained active, up 4.1 percent from this time last year. The Port and Meadowlands submarkets continue to benefit from a majority of the demand, accounting for 71 percent of third-quarter leasing activity in Northern New Jersey.
The lack of available space in Central New Jersey has resulted in difficulty for industrial tenants in search of new space. Accordingly, leasing activity dropped for the second consecutive quarter to 5.0 million square feet. Despite the recent deceleration of leasing velocity in the state’s central counties, net absorption totaled a positive 2.4 million square feet. This was driven by 1.8 million square feet of new industrial product delivery this quarter, all of which was pre-leased.
Similar to its industrial counterpart, office leasing dropped during the third quarter, to 2.2 million square feet, yet overall market fundamentals continued to improve – fueled largely by an increase in user-buyer transactions.
In fact, five office user-sales over 70,000 square feet closed, contributing to 393,000 square feet in occupancy gains and representing a significant portion of the market’s total of 889,599 square feet in positive net absorption over the past three months. Among these impactful transactions, Barclays acquired The Crossings at Jefferson Park and PDI purchased 400 Chestnut Ridge Road in Woodcliff Lake.
“This dynamic pushed year-to-date net absorption in the black for the first time in 2017,” noted Colliers’ John Obeid, senior director, Tri-State Suburban Research for Colliers. “At 20.2 percent, overall office availability improved 40 basis points quarter-over-quarter, reducing the total available space to 42.2 million square feet – the lowest total since year-end 2009.” As a result, average asking rents also showed improvement, rising $0.18 per square foot quarter-over-quarter, to $26.51 per square foot.
Market by Market
The Northern New Jersey office market continued to strengthen during the third quarter, with the availability rate improving by 90 basis points quarter-over-quarter to 20.9 percent. Eleven out of the 13 submarkets tracked registered stable or declining availabilities. Northern New Jersey office leasing totaled 1.2 million square feet, an increase of 18.0 percent from last quarter. The Newark and Parsippany submarkets led the activity, accounting for 28.5 percent of the total.
Five of eight Central New Jersey office submarkets recorded positive net absorption, with the 287 Corridor submarket seeing the most at 111,499 square feet. The Somerset/Route 78 submarket recorded 316,682 square feet of negative absorption, dampening what would otherwise have been sustained improvement for the region as a whole. Central New Jersey office leasing totaled 983,611 square feet, with the Princeton submarket alone accounting for 30.8 percent of the activity. Notable regional leases included PNC Financial Service’s 88,914-square-foot renewal at 2 Tower Center in East Brunswick and Billtrust’s 88,759-square-foot lease at 1009 Lenox Drive in Lawrenceville.
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