Report Highlights Continued Strong Demand across Northern and Central New Jersey Driving Market into 2018
Hackensack, N.J. (February 15, 2018) –NAI James E. Hanson released its 4Q 2017 Northern and Central New Jersey Industrial Market Report detailing leasing and sales data for key industrial submarkets.
The northern and central New Jersey industrial market finished 2017 with the same momentum it began the year seeing over 9.9 million square feet leased in 4Q alone, an increase of over 3.5 million square feet from 3Q 2017. For the first time in recent history, the vacancy rate for northern and central New Jersey’s industrial market ended the year below 4% at 3.7%. This represents a decrease of 0.5% from 3Q 2017 and 0.9% from 4Q 2016. In another sign of the strong demand, each submarket in the region also now stands at a sub-double-digit vacancy rate.
The two hottest markets on the Turnpike, Brunswick/Exit 9 (1.1% vacancy rate) and Exit 8A (1.6%) drove a significant portion of the region’s leasing velocity with over 4.5 million square feet leased in 4Q 2017. The strength of the Turnpike markets also propelled Middlesex County to lead the state with 5.8 million square feet leased in the quarter. In response to this sustained high demand, there are currently over 7.1 million square feet of industrial projects under construction in Middlesex County market scheduled for delivery over the next two years.
Sales volume was also strong in 4Q 2017, almost tripling the volume from 3Q 2017 with over $1.3 billion in total sales in 4Q versus $573 million in 3Q 2017. The sales price per square foot (psf) also saw a jump of $37.09 psf from 3Q 2017, finally eclipsing the triple-digit mark ending the year at $118.75 psf.
In a continuance of the trend that was noted in 3Q 2017, markets outside of the increasingly expensive central Bergen and Middlesex markets saw considerable activity. Somerset County saw an increase from $6.14 psf in 4Q 2016 to $8.09 in 4Q 2017. Similarly, the Hunterdon County market saw an increase from $5.37 psf in 4Q 2016 up to $8.23 in 4Q 2017. Within the hot Bergen County market, the northern portion of the county continues to show strong growth fundamentals with a decrease in the vacancy rate from 6.8% in 4Q 2016 down to 4.7% in 4Q 2017. Much of the demand being driven by the lack of development opportunities and heightened prices as the average asking rate approaches double digits in the central portion of the county, currently standing at $9.04, an increase from $7.40 psf in 4Q 2016. Due to this trend, currently, the largest building under construction in the entire county is The Sitex Group’s 271,195-square-foot spec-development project at 100 Performance Drive in Mahwah, N.J.
“The data behind the fourth quarter of 2017 perfectly illustrates the continued growth trajectory of the northern and central parts of the state. We have seen year-to-year increases in asking rates, and sales numbers with subsequent decreases in vacancy rates as new construction struggles to keep up with red-hot demand,” said Kristen Jost, Research Director for NAI James E. Hanson. “However, there has been significant talk regarding the current high pricing for industrial assets in the region as leasing rates approach double digits and the possibility of a price correction coming at some point within the next 12-18 months. With this in mind, the importance of selecting a highly experienced and knowledge broker like those found at NAI James E. Hanson has never been greater for industrial investors and tenants as they look at their long-term real estate and financial needs.”