1Q16 Market in Review
We Don’t See the Market Getting Soft Anytime Soon
Changing consumer buying habits is making the difference in this current industrial real estate cycle.
We don’t see the market slowing down anytime soon. It appears for every 1 percent that internet sales increase, the New Jersey industrial market gets enourmous upticks in demand. Case in point, Amazon went from having 0 square feet in New Jersey just 3 years ago to over 3 million square feet today.
Today, supply chain efficiency is more important than ever in getting goods from the manufacturer directly to consumers -- and getting goods there faster, same day if possible. And New Jersey is fortuitous in having the best location to reach the most densely populated regions of the US, the Boston to Washington DC corridor. As a result, pricing continues to spike. Rents in certain markets that were $6.50 are now asking $8.50 per square foot to lease. Sales prices for industrial product are at rates never seen before in my 40 years in the business. It is incorrect to think the decrease in sales thus far in 2016 means the sales market has gotten soft. A lack of sales is due to a lock of available industrial product for sale while demand has remained the same and gotten stronger.
Our market has alway benefited from our New York City neighbors. According to Ariel Property Advisors, Brooklyn commercial real estate sales doubled between 2014 and 2015, rising to $1.2 billion from $545 million a year before. The overall dollar volume rose by 60% from 2014 to 2015. Brooklyn’s pricing increases have motiviated buyers to look at New Jersey as a lower cost alternative and the trend has only accelerated in the past 2 years.
We advise clients to move quickly in this market to capture what is available and to lock-in rates before they go higher, or to move on for-sale product before it gets sold. We are in for much more strong activity.