New Jersey Industrial Leasing Up, Fundamentals Improved in 2011

Top Quote U.S. Market Returns to Pre-Recession Levels. End Quote
  • (1888PressRelease) February 01, 2012 - EAST RUTHERFORD, N.J.-Tenants signed nearly 23.4 million square feet of new industrial leases in Northern and Central New Jersey in 2011, representing the highest volume since before the recession, according to year-end statistics for the U.S. industrial market released today by commercial real estate services firm Cushman & Wakefield, Inc.

    This resurgence in activity exceeds the state's 2010 industrial leasing total (12.8 million square feet) by 83.2 percent. The Lower 287 Corridor and Exit 8A markets led the activity, each with more than 4.3 million square feet of transactions.

    New Jersey's largest industrial deal in 2011 involved Wakefern Food Corporation's 1.1 million-square-foot commitment at 8001 Industrial Avenue in Carteret. Additionally, I/O Data Center executed a transaction at 3003 Woodbridge Avenue in Edison. That 831,427-square-foot lease represents the data center provider's third location and the nation's largest data center. In Robbinsville, Kenco Logistics, LLC signed on for 504,286 square feet at 100 West Manor Way.

    The abundance of new leasing activity in New Jersey in 2011 yielded an overall vacancy rate of 9.6 percent, down 1.6 percentage points from 2010. This decrease is heavily noticed in the Lower 287 Corridor which dropped 5.1 percentage points last year, resting at 5.9 percent. The Exit 8A Corridor also saw a substantial decrease from 2010, dropping from 12.7 percent to 10.9 percent currently.

    "Strong leasing activity helped cement 2011 as a turnaround year for New Jersey industrial," noted Gualberto "Gil" Medina, Cushman & Wakefield's New Jersey executive managing director. "With vacancy decreasing, tenants in the market today will notice more competition for space and will have to adjust their decision timelines accordingly. On the flip side, owners are hopeful rents will begin to increase with vacancy rates decreasing to pre-recession levels."

    New Jersey's progress mirrors strong performance nationwide. In the 33 U.S. industrial markets tracked by Cushman & Wakefield, more than 306.3 million square feet of new leases were completed in 2011, up 14 percent from 268.8 million square feet of new leases signed in 2010. Twenty-two of the U.S. industrial markets tracked reported an increase in new activity (with Northern and Central New Jersey among the markets with the most significant increases).

    Stepped-up demand put downward pressure on the national industrial vacancy rate, which declined to 9.2 percent at the end of 2011, down 1.1 percentage point from the 10.3 percent vacancy rate at the end of 2010. Thirty of the 33 markets tracked by Cushman & Wakefield reported year-over-year declines in vacancy*.

    "While there is still concern that global economic uncertainty may erode some of the progress made in the U.S. industrial market, we're increasingly confident that we are at the beginning of a sustained recovery that will gain momentum over the next 12 to 24 months," said Jim Dieter, executive vice president and head of U.S. Industrial Brokerage for Cushman & Wakefield.

    New industrial properties completed in 2011 totaled just 903,000 in Northern and Central New Jersey, with 1.9 million square feet in projects currently underway. "Developers are still awaiting an increase in asking rental rates in order to justify project starts," Medina said. "Still, we are seeing the beginnings of a return to construction. This is evidenced most clearly in JG Petrucci's 572,000-square-foot speculative building now underway on Mill Road in Edison."

    National construction completions totaled 20.5 million square feet, slightly above the 15.9 million square feet completed in 2010, but below the prior five-year average of 88.1 million square feet. Currently, 23.6 million square feet in projects are under construction in the U.S.

    These limited construction completions and increased demand led to healthy absorption - or the net change in occupied space - with levels also reaching pre-recession levels in New Jersey and nationwide. Absorption in the Garden State reached positive 6.4 million square feet, an increase from negative 8.5 million square feet in 2010. Nationwide in 2011, 94.4 million square feet of industrial space was absorbed, up significantly from the 13.1 million square feet of positive absorption in 2010, and the highest level since 2007.

    "The controlled growth of new construction is a positive trend, tracking at a pace that will support the overall recovery without undermining market fundamentals," Dieter said.

    About Cushman & Wakefield, Inc.

    *Lowest National Industrial Vacancy Rates

    1. Lakeland, Fla. 4.5% -1.0
    2. Greater Los Angeles 4.9% -0.1
    3. Portland, Ore. 6.2% -0.8
    4. Orange County, Calif. 6.3% -0.4
    4. SF Peninsula, Calif. 6.3% -2.4
    6. St. Petersburg/Clearwater, Fla. 6.8% -1.5
    7. Philadelphia 7.0% -1.2
    8. Tampa, Fla. 7.5% -1.9
    8. Denver 7.5% -0.5
    10. Houston 7.7% -2.2
    11. Inland Empire, Calif. 8.0% -3.1
    12. Miami 8.1% +0.2
    13. Palm Beach, Fla. 8.4% -0.6
    14. Ft. Lauderdale, Fla. 9.1% +0.2
    15. Oakland, Calif. 9.2% -0.9
    NATIONAL AVERAGE 9.2% -1.1
    16. New Jersey - Northern 9.5% -1.1
    17. New Jersey - Central 9.6% -2.0
    18. Chicago 9.8% -1.2
    19. Pennsylvania I-81/I-78 Distribution Corridor 9.9% -2.1
    20. San Diego 10.4% -0.1
    21. Baltimore 10.6% -0.7
    22. Atlanta 10.7% -0.9
    23. Silicon Valley, Calif. 10.8% -2.2
    24. Jacksonville, Fla. 11.0% -1.2
    25. Dallas/Ft. Worth 12.1% -1.4
    26. Long Island, N.Y. 12.5% -0.5
    27. Contra Costa, Calif. 12.7% -0.2
    28. Phoenix 12.9% -2.3
    29. Suburban Md. 13.1% +0.1
    29. Orlando, Fla. 13.1% -1.4
    31. Hartford, Conn. 13.5% -1.2
    32. Northern Va. 14.4% -0.7
    33. Boston 17.7% -0.7

    * Indicates change in "percentage points" from prior year (not percent).

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