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By Joshua Burd
Vacancy in New Jersey’s industrial market rose in the third quarter despite steady demand, as developers added nearly 4 million square feet of supply with the completion of large projects.
Those are among the findings of new research by NAI James E. Hanson, which noted that the vacancy rate was 3.8 percent as the quarter ended, up from 2.3 percent at the same point last year. Vacancy in individual submarkets ranged from 1.7 percent near New Jersey Turnpike Exit 8A to 6.4 percent near Exit 9, the firm said, while asking rates rose 13 percent year over year to $14.25 per square foot despite showing signs of stabilizing.
NAI Hanson added that leasing activity totaled 3.9 million square feet and was slightly higher than the same period in 2022, but was not enough to offset new listings.
“Questions about the national economy did not have a major effect on the New Jersey industrial market,” the firm wrote in its 3Q 2023 Industrial Report. “Demand for warehouse and distribution space by e-commerce and 3PL firms are still driving activity in market but there are signs that trends may be moderating. The addition of available supply in recent construction completions coupled with an increase in sublease space seem to indicate that the market is ‘normalizing’ after several years of hyper-growth.”
The Teterboro-based real estate services firm noted that industrial vacancy in New Jersey is still below the national rate of 4.2 percent. Asking rents, while growing at a slower pace, are still up over the last 12 months in the 14 submarkets that NAI Hanson tracks and have eclipsed $16.50 per square foot in the Ports and Meadowlands submarkets.
The flip side: New buildings are not leasing as quickly as they were during the market’s peak in 2021. NAI Hanson found that, of the 9.3 million square feet delivered year to date, more than 7 million square feet remains available.
“Though new construction starts have leveled, there are still more than 20 million square feet of industrial product under construction,” the firm wrote. “The submarkets with the most amount of square footage currently under construction are Exit 10/12, Ports and the Meadowlands. Of the current projects, more than 12 million square feet is slated for completion before the end of the year.”
NAI Hanson also pointed to a somewhat mixed picture in the investment sales market in New Jersey, where demand for industrial properties remains strong despite a decline in the number of potential investors. Quarterly dollar volume reached $623 million as more than 3.6 million square feet of industrial space changed hands during that time — a sign that a challenging interest rate environment did not deter investors — while capitalization rates held steady in the low to mid 5 percent range.
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