PARSIPPANY, N.J., Jan. 15, 2015 /PRNewswire/ -- New Jersey's improvement of bridges, tunnels and roadways is driving a significant amount of industrial leasing, pushing the vacancy rate to 7.8 percent, according to Transwestern's Fourth-Quarter 2014 Industrial Market report. This compares to 8.0 percent in third-quarter 2014 and 7.9 percent year-over-year, making this the lowest vacancy rate the region has seen since 2008.
The infrastructure improvements continue to increase demand for warehouse and distribution space throughout the state, prompting bidding wars for high-quality space and a growing number of development and redevelopment opportunities. Despite 1.4 million square feet of new delivery during fourth-quarter 2014, brisk leasing activity and lower vacancy rates have resulted in New Jersey's highest recorded average of asking rents since second-quarter 2009. During the past 12 months, asking rents have increased 3.2 percent, from $5.54 per square foot to $5.72 per square foot.
More than 1.9 million square feet was absorbed during fourth-quarter 2014, pushing the absorption total to 6.5 million square feet for the year. This marks the seventh consecutive quarter and the 10th in the previous 11 quarters that the industrial market recorded positive net absorption.
"Leasing velocity continues to offset the large amount of new industrial development throughout the state," said Matthew Dolly, Research director for Transwestern's New Jersey office. "As the emphasis on improving the arteries of commerce continues in New Jersey, the state will continue to benefit from gains in construction jobs, as well as trade, transportation and utilities — all of which support the growth of the industrial market."
The recent strong gains in the labor market and strengthening fundamentals bode well for the industrial market. According to New Jersey's Department of Labor and Workforce Development, the local unemployment rate dropped to 6.4 percent as of November 2014, the lowest level since October 2008.
"The manufacturing sector, which shrank for decades, is improving modestly due to an increase in American-made products," said Alex Previdi, managing director at Transwestern. "This benefits New Jersey, which is attracting manufacturing companies that want to be near the state's ports, abundance of skilled workers and available labor force. We also expect e-commerce to continue as the catalyst for industrial demand, which could increase as major retailers reduce the size of stores, choosing instead to offer showrooms with limited merchandise while keeping much of their inventory in warehouses."
The demand for product continues to increase as the Port of New York/New Jersey reported record monthly cargo volume in October and a record-breaking year in 2014.
Central New Jersey submarkets along the New Jersey Turnpike led activity during 2014, with tenants absorbing nearly 2.3 million square feet at Exit 7A. The Meadowlands was the most active submarket in Northern New Jersey. Its location on the New Jersey Turnpike, proximity to New York City and excellent access to the ports have made it extremely attractive for both tenants and investors seeking warehouse, distribution and logistics facilities.
The investment market continues at a robust pace in New Jersey. Competition remains fierce among investors seeking well-leased, high-quality product. Users are also active buyers, with several offers above asking prices in some cases.
Transwestern is a privately held real estate firm specializing in agency leasing, property and facilities management, tenant advisory, capital markets, research and sustainability. The fully integrated global enterprise leverages competencies in office, industrial, retail, multifamily and healthcare properties to add value for investors, owners and occupiers of real estate. As a member of the Transwestern family of companies, the firm capitalizes on market insights and operational expertise of independent affiliates specializing in development, real estate investment management and research. Transwestern has 34 U.S. offices and assists clients through more than 180 offices in 38 countries as part of a strategic alliance with Paris-based BNP Paribas Real Estate. For more information, please visit transwestern.com and follow us on Twitter: @Transwestern and @TranswesternNJ.
Amanda Ferraro, Beckerman