"Industrial performed well during 2013," noted Kimberly Brennan, the commercial real estate services firm's New Jersey market leader. "Most notably, year-end totals show that nearly 18.0 million square feet of space has been absorbed since 2011, after we saw almost 22.0 million square feet of negative absorption during the two prior years."
This recovery can be credited largely to healthy demand, which resulted in 21.3 million square feet of industrial leasing during 2013 - an impressive 20.3 percent increase over 2012 and the second highest annual accrual in the last six years. Central New Jersey outpaced the northern counties by 1.5 million square feet, with both the Lower 287 and Exit 8A submarkets yielding more than 3.2 million square feet in volume for the year.
During the fourth quarter, 11 deals in excess of 100,000 square feet closed, four of which occurred in the Meadowlands. That submarket saw in excess of 1 million square feet of new industrial leases during October, November and December, the highest volume statewide.
"Large deals represented a significant 37.5 percent of New Jersey's fourth quarter industrial demand," Brennan said. "However, mid-sized deals - those between 25,000 and 100,000 square feet - drove leasing activity, accounting for 44.3 percent of the quarterly total."
The overall industrial vacancy rate in New Jersey declined to 8.2 percent during the fourth quarter, from 8.9 percent at the end of third quarter and 9.1 percent at the close of 2012. The Northern counties saw vacancy decline more sharply during the fourth quarter, falling one percentage point to 8.0 percent. Both the Meadowlands and Port Region saw vacancy drop sharply. Central New Jersey saw a 0.5 percentage point decline, to 8.5 percent. The vacancy rate at Exit 8A edged lower by 0.7 percentage points. Exit 7A was the only major submarket to see vacancy rise (+0.9 percentage points) during the quarter.
"As a natural result of demand catching up with supply in the New Jersey industrial market, rental rates are rising," Brennan said. "The average direct net asking rental rate finished 2013 at $5.99 per square foot, up 3.6 percent year-over-year and the highest it has been since year-end 2009." All five major submarkets along the turnpike recorded up-ticks in asking rents during 2013, led by Lower 287, which saw a $0.35-per-square-
Meanwhile, just more than 2.0 million square feet of industrial product was delivered to the market during 2013, most of which is concentrated in Middlesex County. All but one project, the 572,000-square-
"Quality available industrial space continues to diminish in the marketplace, and the development community has responded," Brennan said. "Of the 16 projects slated for completion in the next two years, 10 are being built on a speculative basis."
Moving ahead into 2014, Brennan anticipates another strong year for New Jersey industrial. "The industrial market recovery is well underway in the Garden State," she said. "All indicators point to continued strong demand in the coming year. Provided that the new supply pipeline remains in check, fundamentals should continue to improve into the foreseeable future."