Kim Brennan

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Cushman & Wakefield of New Jersey, Inc.
One Meadowlands Plaza, Suite 1100
East Rutherford, New Jersey 07073

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Release Date: Tuesday, January 13, 2015

Media Contact: Evelyn Weiss Francisco (201) 796-7788

2.1 Million Square Feet of Net Absorption Brought 2014's Total to 11.7 Million Square feet

EAST RUTHERFORD, N.J, January 13, 2015 – Continuing healthy demand, falling vacancies and new construction totals not seen in more than a decade marked both the fourth quarter and year-over-year performance of New Jersey's industrial real estate market. Cushman & Wakefield's research team's figures point to a market that continues to improve post-recession.

"The final quarter of 2014 saw demand slow somewhat, but it remained healthy enough to offset some large space dispositions that did occur in the market," said Kim Brennan, the commercial real estate firm's New Jersey market leader. "Overall, the statewide vacancy rate inched lower to 8.2 percent and, as a result, the average direct rental rate rose by 4.6 percent to $6.44 per square foot."

Overall, net absorption in the New Jersey market remained on the plus side, amounting to 2.1 million square feet during Q4, bringing the total for the year to more than 11.7 million. "That's the highest amount of annual space gains in New Jersey in recent history," said Brennan. "This was the result of generally robust leasing throughout much of the year, coupled with build-to-suit deliveries in some of the major market segments. The Exit 8A and Exit 7A submarkets, along with the port region and the Meadowlands accounted for the bulk of the net absorption."

The overall market vacancy rate of 8.2 percent marked a 0.1 percent drop from Q3, according to Cushman & Wakefield's research team. That drop was attributed to the Central New Jersey submarket, where vacancies dropped by 0.2 percent, largely because of improving occupancies in the Exit 7A and Upper I-287 submarkets. Northern New Jersey remained virtually unchanged at an overall vacancy of 7.5 percent.

Of the major submarkets along the Turnpike, only the Port Region and Exit 7A saw improvements in vacancy, with, Exit 8A and the Meadowlands remaining relatively flat. The Lower I-287 submarket continued to see vacancy trend upward with demand remaining relatively tepid.

And while Q4 new leasing activity of 4.6 million square feet was a nine-quarter low, demand was still healthy enough for New Jersey to post its strongest year since 2011 with 23 million square feet of new deals closing in 2014. Of that total, Northern Jersey recorded 9.2 million square feet, down 7.4 percent from 2013; Central New Jersey countered with a 21.7 percent gain year-over-year to 13.9 million square feet.

By submarket, the Meadowlands and Exit 8A each topped four million square feet of leasing activity, and Lower I-287 recorded just over 3.1 million square feet. In Q4 in particular, Exit 8A was the most active submarket, registering nearly 900,000 square feet of leases.

"Large transactions were the driving force behind deal volume in the fourth quarter, registering 52.7 percent of the total," said Brennan. "Altogether, there were 12 leases in excess of 100,000 square feet."

The most notable deals were: Technology giant SHI's 305,000-square-foot lease of newly constructed space at 10 Knox Drive South in Piscataway; the Judge Organization's 263,000-square-foot lease at 150 Industrial Drive in Jersey City; and a 202,000-square-foot lease by B&H Photo at 1000 Secaucus Road in Secaucus.

In terms of rents, the market-wide average asking rent of $6.44 per square foot was up 7.5 percent since the end of 2013. For warehouse/distribution in particular, the direct average rent inched higher by $0.04 per square foot during Q4 and 6.5 percent since a year ago. And while Northern New Jersey experienced a slight up-tick during the quarter to $6.21 per square foot for W/D space, Central New Jersey saw its average edge marginally lower by -$0.03 to $4.89 per square foot, attributed to some older product coming on the market in Middlesex County.

Finally, new construction reached a high not seen since 2002 with more than 7.3 million square feet of industrial product added to the inventory during 2014. And unlike during the last peak cycle when virtually all the space was speculative, approximately half of new developments in 2014 were build-to-suits. The Port and Lower I-287 submarkets experienced the highest amount of new development during the year. Currently there is a total of 3.1 million square feet under development statewide slated for delivery in 2015.

"Given the amount of new space that continues to reach the market, coupled with positive trends we are seeing in key submarkets, we expect 2015 to be another strong year for New Jersey's industrial market," said Brennan. "The indicators point to continued strong demand, and the fundamentals are expected to continue to improve."


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