MARKETVIEW
New Jersey Industrial, Q1 2016
Big box occupiers drove
leasing velocity to
a historic high
Availability
Lease Rate
7.5%
Net Absorption
$6.01 PSF
Leasing Velocity
2,934,462 SF
7,914,640 SF
Arrows indicate change from previous quarter.
Consumer spending continues to play a prominent
role in rising warehouse demand throughout the
United States, and New Jersey is a clear beneficiary.
Industrial demand in New Jersey is far from
slowing down. In the first quarter, big-box
occupiers signed a record number of new lease
transactions, driving quarterly leasing velocity to a
historic high.
construction. These transactions drove leasing
velocity to 7.91 million sq. ft., representing the
highest volume since Q3 2013. Modern-generation
buildings attracted a large portion of demand, as
53.0% of the first quarter’s new lease commitments
occurred at Class A properties—a property group
that accounts for only 9.8% of the State’s total
inventory.
In total, the market recorded five new lease
transactions over 500,000 sq. ft.—one more than
the previous two years combined. New
construction continues to play a prominent role in
big-box leasing, as four of five new leases over
500,000 sq. ft. occurred at properties that were
either recently delivered or are currently under
Demand continued to be concentrated in New
Jersey’s core industrial submarkets. Exit 8A, Route
287/Exit 10, Linden/Elizabeth, Carteret/Avenel, and
Newark recorded 74.7% of the State’s total leasing
velocity. Notable transactions included: a
810,000-sq.-ft. e-tailing commitment in Carteret/
Avenel; Fabuwood’s 706,000-sq.-ft. lease in Newark;
Figure 1: Historical Availability Rates vs. Asking Lease Rates
Asking Lease Rate ($/SF)
Availability (%)
12
8
10
8
7
6
4
6
2
0
2005
2006
Availability
Q1 2016 CBRE Research
2007
2008
2009
Asking Lease Rate
2010
2011
2012
2013
2014
5
2015
Q1 2016
Source: CBRE Research, Q1 2016.
© 2016 CBRE, Inc. | 1
MARKETVIEW NEW JERSEY INDUSTRIAL
FedEx’s 695,000-sq.-ft. commitment in Route 287/
Exit 10; and Fedway Associates’s 539,000-sq.-ft.
lease in Linden/Elizabeth.
As markets continue to tighten, developers are
active to bring new product on line. In just the first
quarter, eight projects totaling 2.02 million sq. ft.
broke ground. Furthermore, industrial deliveries
recorded in the first quarter amounted to the
second highest volume in New Jersey’s history. 1.68
million sq. ft. of new inventory was introduced to
the market.
Since 2012, new projects are minimally impacting
the State’s overall availability rate, as the average
absorption time for newly delivered speculative
product continues to be six months after
completion. In response to this, industrial
developers are showing no signs of slowing down
the construction pipeline.
Following a very impressive 2015, the New Jersey
industrial market recorded its fifth consecutive
quarter of positive absorption, posting 2.93 million
sq. ft. Across the State, 18 of the 24 submarkets
registered positive absorption, depressing the
State’s availability rate by 165 basis points yearover-year to 7.5%. Now, 32 quarters from its peak
rate, availability remains only 28 basis points from
its pre-recession low. The availability rate is on
pace to drop below 7.0% by the end of 2016.
Figure 2: Q1 2016 Notable Lease Transactions
Size (SF)
Tenant
Address
City
Type
810,000
E-tailing Company
380 Middlesex Ave
Carteret
New Lease
706,083
Fabuwood Cabinetry
69-71 Blanchard St
Newark
New Lease/Under Construction
695,072
FedEx
25-53 Talmadge Rd
Edison
New Lease/Under Construction
550,850
Central Garden & Pet
965 Cranbury South River Rd
South Brunswick
New Lease
539,308
Fedway Associates
10 North Ave
Elizabeth
New Lease/Under Construction
City
Type
Source: CBRE Research, Q1 2016.
Figure 3: Q1 2016 Notable Sale Transactions
Size (SF)
Buyer
Address
1,159,234
ADIA JV PSP Investments
Portfolio Sale
1,000,000
Commercial Development Company
861 Sloane Ave
Trenton
Sold to Investor
851,055
Safavieh
1200 Route 523
Raritan Township
Sold to User
300,000
The Hampshire Companies
700 Union Blvd
Totowa
Sold to Investor
254,750
Weiss Realty
1 Buckingham Ave
Perth Amboy
Sold to Investor
Sold to Investor
Source: CBRE Research, Q1 2016.
Q1 2016 CBRE Research
© 2016 CBRE, Inc. | 2
MARKETVIEW NEW JERSEY INDUSTRIAL
AVERAGE ASKING LEASE RATE
For the 13th consecutive quarter, the average
asking lease rate for industrial space in New Jersey
increased, now reaching $6.01 per sq. ft. and
nearing its pre-recession high. Northern New Jersey
recorded an increase of $0.38 per sq. ft. year-over
year, while Central New Jersey recorded a $0.13 per
sq. ft. increase over the same time period. As
availability reached its lowest point since the
beginning of 2008, tightness in the market will
continue to support rental growth.
Figure 4: Historical Average Asking Lease Rate
$/SF
7
6
5
4
Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
NJNNJCNJ
Source: CBRE Research, Q1 2016.
AVERAGE ASKING SALE RATE
The average asking sale rate for industrial product
in New Jersey rose slightly to $68.52 per sq. ft. This
represents a $1.16 per sq. ft. year-over-year increase
and is the highest recorded sale price since Q1
2010. Northern New Jersey recorded its highest rate
since Q3 2012 at $72.53 per sq. ft., and Central New
Jersey ended the quarter with an asking sale rate of
$64.25 per sq. ft., the highest rate seen since Q1 2010.
Figure 5: Historical Average Asking Sale Rate
$/SF
75
70
65
60
55
50
Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
NJNNJCNJ
Source: CBRE Research, Q1 2016.
US INDUSTRIAL MARKET
The U.S. industrial market recovery remains steadfast. The
warehouses have greatly benefitted from healthy
national availability rate declined from 9.4% to 9.2% in
consumer spending. Construction activity is the strongest it
Q1 2016, marking the 24th consecutive quarterly decline
has been since 2008. Much of the space coming online is
and the lowest rate since 2001. Despite facing significant
being leased by big-box retailers, which are expanding
challenges, including the strong dollar, weak global
rapidly to accommodate the ever-growing propensity for
growth, and low energy prices, the U.S. industrial market
online purchasing.
has been resilient, mostly thanks to a healthy labor market
and low inflationary pressure. Since the industrial market
relies heavily on consumer spending, U.S. industrial
Q1 2016 CBRE Research
Source: CBRE Econometric Advisors, Q1 2016.
© 2016 CBRE, Inc. | 3
MARKETVIEW NEW JERSEY INDUSTRIAL
NET ABSORPTION
The first quarter’s net absorption totaled a positive
2.93 million sq. ft., despite Northern New Jersey’s
168,007 sq. ft. of negative absorption. Central New
Jersey registered its fifth straight quarter of positive
absorption, with 3.10 million sq. ft. As a result, the
entire State’s availability dropped to 7.5%—a 32
basis-point decrease quarter-over-quarter and a
165 basis points decrease year-over-year.
Figure 6: Historical Net Absorption
MSF
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
(0.5)
(1.0)
(1.5)
Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
Source: CBRE Research, Q1 2016.
CONSTRUCTION COMPLETED
In Q1 2016, six projects totaling 1.68 million sq. ft.
were delivered to the market—37.5% of these
having occupier commitments in place. Eight new
projects broke ground in Q1 2016, bringing the
total number of projects currently under
construction to 20. Of the 6.0 million sq. ft. being
developed, 4.01 million sq. ft. is being built on
spec. Based on this pipeline, another 5.36 million
sq. ft. will be introduced to the market by the end
of 2016.
Figure 7: Historical Construction Completed
MSF
2.0
1.5
1.0
0.5
0.0
Q4 2014 Q1 2015 Q2 2015 Q3 2015
Q4 2015 Q1 2016
Source: CBRE Research, Q1 2016.
PORT OF NY AND NJ ACTIVITY
Activity at the New York and New Jersey port terminals
their “Raise the Roadway” project that will add an
remains strong, which typically helps to drive growth for the
additional 64 feet of air draft to the Bayonne Bridge,
surrounding New Jersey industrial real estate market.
ultimately allowing new super container ships access
Year-to-date loaded container traffic in TEUs is up 5.2%
to the ports.
over the same period last year. The Port Authority is
continuing to partake in the U.S. port Industry’s East Coast
As the largest port on the East Coast and the third largest in
race to upgrade infrastructure in preparation for the larger
the U.S., the Port of New York and New Jersey is a
cargo vessels that will pass through the Panama Canal.
passageway to one of the largest and most important
New Jersey and the Port Authority of NY/NJ are continuing
consumer markets in the world.
Q1 2016 CBRE Research
© 2016 CBRE, Inc. | 4
MARKETVIEW NEW JERSEY INDUSTRIAL
Figure 8: Q1 2016 Market Statistics
Submarket
Market
Rentable
Area (SF)
Availability
(SF)
Availability
Rate (%)
Avg. Asking
Lease Rate
($/SF/Yr)
Avg. Asking
Sale Rate
($/SF)
Leasing
Velocity (SF)
Net
Absorption
(SF)
Central Bergen
31,386,683
2,323,490
7.4
6.82
87.53
66,920
24,906
Fairfield Market
18,497,533
1,754,253
9.4
6.84
93.86
0
(155,376)
Hudson Waterfront
62,964,811
3,747,986
5.9
6.32
53.74
613,395
508,064
Meadowlands
94,860,689
8,582,900
9.1
7.43
86.75
350,050
(472,269)
Morris Region
43,398,924
4,416,526
10.2
6.16
78.08
275,359
15,327
Newark
51,503,429
2,658,218
5.2
6.10
58.07
706,083
(150,922)
North East Bergen
7,946,728
656,142
8.3
6.40
121.32
26,928
23,833
North West Bergen
19,244,843
1,792,600
9.3
7.42
48.09
0
0
553,533
146,932
26.5
8.17
82.65
0
0
Route 46/23/3 Interchange
56,625,610
4,456,995
7.9
6.89
59.12
216,430
(4,570)
Suburban Essex
12,733,135
558,542
4.4
4.40
42.41
0
0
3,713,850
119,683
3.2
6.00
75.63
0
43,000
403,429,768
31,214,267
7.7
6.74
72.53
2,255,165
(168,007)
Brunswicks/Exit 9
25,405,726
1,654,659
6.5
4.92
53.54
161,600
(144,320)
Carteret/Avenel
24,549,833
2,238,003
9.1
6.20
115.06
1,170,225
1,110,225
Central Union
24,974,952
1,656,490
6.6
5.27
68.30
143,890
142,190
Exit 8A
70,001,438
5,218,212
7.5
4.78
72.96
1,503,279
879,893
6,306,635
908,798
14.4
3.22
31.57
0
0
Linden/Elizabeth
43,216,307
2,272,768
5.3
6.14
87.63
1,243,334
97,309
Monmouth
24,243,648
1,475,085
6.1
7.65
74.60
9,200
(59,718)
Princeton
9,846,509
521,912
5.3
5.91
49.63
35,964
35,964
98,875,892
6,778,415
6.9
4.72
65.19
1,286,983
740,046
9,768,961
880,022
9.0
3.84
27.22
0
0
Somerset
37,480,585
2,477,451
6.6
5.54
63.84
105,000
140,880
Trenton/295
29,012,206
3,453,873
11.9
3.91
30.49
0
160,000
Central New Jersey Total
403,682,692
29,535,688
7.3
5.05
64.25
5,659,475
3,102,469
New Jersey Total
807,112,460
60,749,955
7.5
6.01
68.52
7,914,640
2,934,462
Route 23 North
Route 280 Corridor
Northern New Jersey Total
Hunterdon
Route 287/Exit 10
Route 78 East
Source: CBRE Research, Q1 2016.
Q1 2016 CBRE Research
© 2016 CBRE, Inc. | 5
MARKETVIEW NEW JERSEY INDUSTRIAL
CONTACTS
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3
William Forcello
Research Manager
+1 201 712 5654
[email protected]
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CBRE OFFICES
1. Route 23 North
2. North West Bergen
3. North East Bergen
4. Morris Region
5. Route 46/23/3 Corridor
6. Central Bergen
7. Fairfield Market
8. Route 280 Corridor
9. Suburban Essex
10.Meadowlands
11.Hunterdon
12.Somerset
13. Route 78 East
14. Central Union
15.Linden/Elizabeth
16.Newark
17. Hudson Waterfront
18.Princeton
19. Brunswicks/Exit 9
20. Route 287/Exit 10
21.Carteret/Avenel
22.Trenton/295
23. Exit 8A
24.Monmouth
Saddle Brook
Park 80 West, Plaza Two
250 Pehle Avenue, Suite 600
Saddle Brook, NJ 07663
East Brunswick
Two Tower Center Boulevard, 20th Floor
East Brunswick, NJ 08816
Florham Park
100 Campus Drive
Florham Park, NJ 07932
To learn more about CBRE Research, or to access
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Research Gateway at:
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© 2016 CBRE, Inc. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy,
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