Rents surged and vacancies fell to an all-time high for warehouses and other industrial buildings in northern and central New Jersey from June through September, a new report said Wednesday, as demand for e-commerce continued to rise. fueling the state’s searing market for logistics space. .
The asking price for industrial rents rose 15.6% to a record $ 10.72 per square foot, while vacancy rates fell to 3.4% from 3.8% just three months more early. For warehouses, which make up about three-quarters of the overall industrial market, the vacancy rate was even lower, at 2.9%, according to the report from Newmark, a commercial real estate company.
As in the first half of 2021, growth was once again driven by very strong demand from logistics companies for storage and distribution spaces for an avalanche of goods ordered online.
“Insatiable demand for e-commerce, corresponding to a long-term shift in consumer spending habits towards online spending and moving away from mainstream retail stores, remains a key driver of rental business,” said the report.
Demand for logistics space has been strong for the past five years, but has been fueled more over the past year by online shopping during the pandemic. It was also motivated by the state’s proximity to Port Newark-Elizabeth, where one of the country’s largest volumes of consumer imports enters the country, and New Jersey’s position at the heart of the populated market. from the northeast.
While the boom has created thousands of jobs, including some 50,000 in Amazon alone, it has also sparked protests and lawsuits in some communities where residents fear local roads will be choked with new traffic. of trucks and that the remaining rural enclaves be occupied by warehouse giants of up to a million square feet or more.
Within the Legislature, public concern that warehouses affect areas beyond the cities where they are built has also spawned a bill co-sponsored by Senate Speaker Steve Sweeney (D-Gloucester) that would require cities facing a warehouse request to alert neighboring municipalities and try to gain their support for the project.
Figures show significant growth
The new data shows that the boom is only accelerating. Industrial space under construction, almost all of which was for warehouses, reached 13.9 million square feet in the last quarter, compared to 13.4 million in the second quarter of 2021. Despite a supply shortage, the amount of industrial space leased in the first three quarters of this year, 28 million square feet, exceeded that of the whole of 2020.
Another key indicator of strong demand, net absorption – the difference between the amount of industrial properties that were occupied in the quarter and those that became vacant – jumped to 4.7 million square feet last. quarter, up from 3.1 million square feet in the previous three months.
“It’s remarkable to me that this continues to increase,” said Tim Evans, research director at New Jersey Future, a nonprofit that advocates “smart growth.” He said the warehouse boom cannot be fully explained by the increase in online shopping during the pandemic, and may also have been fueled by an increase in the volume of imported goods arriving in Port Newark-Elizabeth from Asia since the widening of the Panama Canal. to accommodate larger vessels in 2016.
Evans predicted that the continued high demand for warehouse space will result in vacant and already developed land being secured for an industry that wants to be as close to the port as possible. This process may involve the âsecond generationâ redevelopment of sites that first housed factories, then became office parks and would now be occupied by warehouses.
âAs factories near the port run out, they could start buying second-generation redevelopment sites like office parks,â he said.
The report says there is a “growing imbalance” between supply and demand, especially in submarkets where available land is limited. They include the Meadowlands, where rents jumped 28.5% in the last quarter from a year earlier. The report predicts that significantly higher rents will prompt developers to redevelop land or reuse existing buildings.
Major transactions included 840,000 square feet leased to Peloton, the manufacturer of fitness equipment, in Linden; 511,000 square feet in Warren County to Alan Ritchey, a logistics provider, and 326,000 square feet in the Meadowlands taken by TJ Maxx, a clothing retailer.
In the warehouse sector in particular, the highest asking rent among 21 local markets was $ 14.73 per square foot in the Meadowlands, followed by $ 14 in the market around Exit 12 of the Toll Highway in the New Jersey where the vacancy rate was virtually nonexistent at 0.1%.
No end in sight
There is no sign that high rents and low vacancy rates will decrease anytime soon, given continued strong demand from logistics companies, according to the report. He predicts that developers will continue to face rising construction costs, shipping delays, and labor shortages.
“In the coming months, strong demand from e-commerce and logistics companies is expected to maintain record vacancy rates, leading to further growth in warehouse rents,” he said.
Micah Rasmussen, a Rider University professor who led a successful campaign against a planned warehouse at Upper Freehold earlier this year, said people should be wondering if New Jersey is becoming overdeveloped – in light the ongoing warehouse boom and the devastating flooding caused by Tropical Storm Ida.
âI think the shortcomings of our overdevelopment became a lot clearer for a lot of people during Ida,â he said. âWe need to rethink what we do, and given what’s going on in the market, this seems like the perfect time for us to do it. “