Cautious Optimism for NJ Industrial Real Estate Market at Start of 2012
CAUTIOUS OPTIMISM FOR NJ INDUSTRIAL REAL ESTATE MARKET AT START OF 2012
- While Current Numbers Paint Another Positive Picture for the Industrial Market, Momentum May Slow, Says CBRE’s First Quarter 2012 New Jersey Industrial MarketView Report –
SADDLE BROOK, N.J. (APRIL 25, 2012)– The findings in CBRE New Jersey’s First Quarter 2012 New Jersey Industrial MarketView Report reflect another quarter of positive absorption and elevated leasing activity, but CBRE executives are maintaining a cautiously optimistic outlook.
New leasing velocity rose above six million sq. ft. for the third time in the past five quarters. 17 buildings traded ownership during the quarter. Prior to the first quarter of 2011, this volume of activity was not seen since the first quarter of 2007.
New Jersey’s availability dropped once again, although only slightly to 10.4 percent. It appears that a battle between north and south has sparked within the State. The gap in market performance between Northern New Jersey and Central New Jersey is quite measurable. Central New Jersey’s absorption, which amounted to 1.83 million sq. ft. in the first quarter, continues to outperform Northern New Jersey, which saw negative absorption of 1.08 million sq. ft.
“Central New Jersey continues to show strong velocity,” said Thomas Monahan, CBRE senior vice president. “For traditional warehouse/distribution uses, larger Class A assets, or those that provide good, flexible design, are stabilizing much faster than similar 2nd generation product found in Northern New Jersey.”
Monahan continued, “It is important to note that the pendulum is constantly shifting, as the regional market of Central New Jersey is not only competing within New Jersey, but also with the regional markets of other states, most notably Pennsylvania.”
At the end of Q1 2012, the average asking lease rate for industrial property in New Jersey, $5.15 per sq. ft., remained unchanged from that of the fourth quarter of 2011. This is the first quarter since Q2 2008 that the State’s asking lease rate did not drop.
“Industrial tenants are still very cost-conscious when making real estate decisions,” said Noah Balanoff, CBRE vice president. “They continue to pursue more affordable space options that would have previously been deemed too logistically inconvenient to consider; hence Central New Jersey’s heightened activity.”
Balanoff further points out that after experiencing one of the lengthiest economic downturns in history, owners are growing anxious to increase lease rates. “They really have to make calculated decisions because setting higher asking rates too quickly could deter tenant willingness to commit to new space,” he cautioned.
During Q1 2012, a 150,000-sq.-ft. building finished construction for Ritchie & Page Distributing Company in Robbinsville. Six properties totaling 751,280 sq. ft. are currently under construction in the State with 516,355 sq. ft. being pre-committed.
Large user requirements throughout New Jersey are increasingly limited in space options, and CBRE expects there will be a pickup in speculative construction activity this year. Those already in the pipeline include a 232,000-sq.-ft. building in Carteret and a 350,000-sq.-ft. building in Newark.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2011 revenue). The Company has approximately 34,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com.