8A — May 2023 — Office & Industrial/Distribution Centers — M id A tlantic Real Estate Journal
www.marej.com
O ffice & I ndustrial /D istribution C enters Transwestern Moderate Growth Continued for the New Jersey Industrial Market to Open 2023
upply Meets Demand Moderate growth continued for the New Jersey industrial market to open 2023. Warehouse/distribution properties maintained strong occupancy gains while manufacturing buildings re- turned space for the second consecutive quarter. Despite occupancy growth for the 16th consecutive quar- ter, the vacancy rate jumped to the highest level since Q1 2021. Increased supply con- tributed to the rise in vacancy as the amount of new product added to the market since the start of the pandemic has fi - nally caught up with demand. New construction contributed to rising asking rents, which recorded the second highest quarterly increase on record. Employment supporting the industrial real estate sector continued to increase, how- ever, the growth rate on an annual basis has decelerated. Logistics companies and e- commerce retailers continued to trim jobs due to a slowdown in spending. Overall, both the US loyment rates reported little change while labor par- ticipation remains below pre- pandemic levels. Economy • The U.S unemployment rate remained ticked up slightly to 3.6% during the quarter and has ranged be- tween 3.5% and 3.7% since Q1 2022. • Labor participation has not changed much in more than a year and remains below February 2020 pre- pandemic levels. • Employment supporting the industrial real estate sector continued to increase, however the growth rate on an annual basis has deceler- ated. Logistics companies and e- commerce retailers continue to trim jobs due to a slowdown in spending and online shop- ping. • New Jersey’s unemploy - ment rate ticked up slightly during the quarter but re- mains on par with pre-pan- demic lows. • Continuing a trend from the previous quarter, cargo volumes continued to decline, though the Port of New York and New Jersey reestablished the ranking it attained late in 2022 as the second busiest port in the US. S
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the start of the pandemic, compared to 26 million s/f the previous three years. Vacancy • The rate of unoccupied space jumped 40 basis points for the second consecutive quarter to 3.4%, the highest level since Q1 2021, pushing the vacancy rate higher by 100 basis points when com- pared year-over-year. • Vacant sublease space increased for the third time in the past four quarters and is at its highest level in two years. • Warehouse/distribution properties continued to re- cord strong occupancy growth while manufacturing build- ings returned nearly one mil- lion s/f of space to the market during the past six months. • Half of the submarkets studied experienced occu- pancy growth during Q1 2023, while 60% of submarkets re- corded year-over-year gains. • The vacancy rate in the
New Jersey industrial mar- ket remained 80 basis points lower than the U.S. average. Under Construction • Total product under con - struction continued to decel- erate, while new deliveries totaled more than four million s/f for the second consecutive quarter. • Groundbreakings have slowed as less than 20 million s/f is under construction for the first time since the same quarter a year ago. • 24 of 29 submarkets have product under construction, seven with at least one mil- lion s/f, including two with more than two million s/f being built, led by Hudson Waterfront. • One-third of space under construction is preleased, up from 25% the previous quarter. • Supply has finally caught up with demand as the amount of new product added to the market since the start
of the pandemic has finally outpaced occupancy growth during the same period. Rental Rates Quarterly increase nears historic high • Asking rents spiked con - siderably due to steady de- mand and new construction delivered to the market. • The 6.6% quarterly in - crease in asking rent was the second highest on record, surpassed by only the 7.6% rise during Q1 2021. • Rents have grown by 16.1% during the past 12 months, recording double- digit YoY growth for the ninth consecutive quarter. • The average asking rent has risen for 34 consecutive quarters, increasing by 140% during that period. • Rents increased in over 80% submarkets during the past 12 months, including three submarkets which more than doubled during the past year. MAREJ
Net Absorption • Occupancy growth oc - curred for the 16th consecu- tive quarter, and 43rd time in the past 44 quarters. • Warehouse-distribution properties recorded occupan- cy growth for the sixteenth consecutive quarter, while negative net absorption was recorded in manufacturing buildings for the second con- secutive quarter. • Year-over-year occupancy growth fell to the lowest level since 2012, as 4.2 million s/f of inventory was absorbed during the past 12 months, one-third of the previous five- year average. • Transportation and ware - housing companies repre- sented more than onethird of leasing activity during the past 12 months, followed by retailers at nearly 25% and manufacturers at 15%. • Nearly 31 million s/f of industrial space has been ab- sorbed in the three years since
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