EAST RUTHERFORD – New Jersey’s industrial real estate market through the first half of 2010 showed renewed progress following a couple of challenging years, according to commercial real estate services firm Cushman & Wakefield, Inc. Whether the shift can be traced to more realistic landlord expectations, the state’s strong fundamentals in an improving economy, positive trends in manufacturing and inventories, or a combined “all of the above,” the net result is encouraging.
Year to date, Central New Jersey recorded 3.5 million square feet of new industrial lease deals, equivalent to totals recorded at second quarter 2009; Northern New Jersey experienced a 400,000-square-foot uptick from the same time period, recording 2.9 million square feet in total. The cumulative 6.4 square feet of new leasing activity is on par with totals recorded last year at this time, according to Cushman & Wakefield’s New Jersey research services team.
Within this context, Cushman & Wakefield’s industrial brokers closed 1.1 million square feet of new Garden State leases and renewals during the first six months of the year. Highlights included:
- Menlo Logistics’ 221,331-square-foot renewal at 24 Engelhard Drive in Monroe Twp.;
- Production Resource Group’s 203,771-square-foot commitment at 915 Secaucus Road in Secaucus;
- Suite K Value Added Services Inc.’s 178,502-square-foot lease at 120 Herrod Boulevard in South Brunswick; and
- Exel Logistics’ 130,205-square-foot lease at 251-259 Kapkowski Drive in Elizabeth.
“In this climate, industrial property owners and their brokers really need to be aggressive to get deals done,” noted Stan Danzig, an executive director at Cushman & Wakefield’s East Rutherford office. “We all have become more creative, more responsive and more realistic. This approach is paying off, because more deals are beginning to come together.”
Cushman & Wakefield’s mid-year research findings showed a second quarter direct triple net weighted average asking rental rate of $5.92 per square foot for New Jersey industrial product. This represented a $0.54 per-square-foot year-over-year decline, yet only a $0.10 per-square-foot decline from last quarter.
Frank Caccavo, a Cushman & Wakefield executive vice president based in Edison, noted that, despite this rental fluctuation, overall available industrial space for Northern and Central New Jersey combined remained fairly flat. The overall vacancy rate at the end of the second quarter stood at 11.1 percent. As context, the national industrial vacancy registered 10.6 percent at mid year, according to Cushman & Wakefield’s national industrial research team.
“The New Jersey market, despite the depression in prices, is less volatile than some areas of the country,” Caccavo said. “New leases are absorbing space in an overbuilt inventory – especially at Exit 8A – and land constraints are keeping additional development in check. From a ground-level perspective, it feels like the market has been bouncing along bottom for some time but has truly started to turn around.”
The New Jersey industrial market long has benefited from its central location in the northeast corridor, highly evolved transportation infrastructure and port facilities, and reputation as one of the nation’s leading industrial real estate hubs. “New Jersey is integral for the United States industrial landscape in so many ways, especially in its positioning to distribute goods along the eastern seaboard and into the Midwest,” noted Cushman & Wakefield’s Jim Dieter, SIOR, executive vice president, Industrial Brokerage, U.S.
Nationwide, positive trends in manufacturing and inventories suggest that the industrial recovery will continue to gain momentum, according to Dieter. “The Institute of Supply Management’s Manufacturing Index is coming into 10 straight months of improvement,” he said. “We also are seeing that the universal ‘destocking,’ or inventory reduction, that has taken place among major companies through the down cycle is beginning to end. The New Jersey industrial footprint today is mainly a big-box distribution center, and that should benefit from this progress.”
Looking ahead to the remainder of 2010, Cushman & Wakefield anticipates continued steady – albeit slow – progress for the New Jersey market. For the long-term, the state is well positioned for forward progress. “Today’s core industrial markets include the presence of intermodal hubs, stable supply and demand factors, liquidity, diversification, and market depth,” Dieter noted. “They also generally feature superior infrastructure with international airports and container ports. New Jersey fits this profile in every way.”
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