Location, Demand Drive Statewide Growth in New Jersey Industrial Market
A combination of location and demand for e-commerce continues to drive industrial activity across New Jersey, spurring increased activity in the already robust northern and central regions of the state and driving a frenzy of activity in the south. Unlike some of the previous speculative booms, however, this one appears be carefully thought out and is likely to be sustainable.
Northern and Central New Jersey
We are seeing an enormous increase in the number of tenants interested in the market who face a limited supply. Across Northern and Central New Jersey, a record low vacancy rate of 3.4 percent is pushing rental rates to an all-time high despite a healthy but cautious building cycle. The region is an inherently attractive one, thanks to its proximity to New York City and Port Newark as well as the ability to reach 60-plus million people in the tri-state area in a matter of hours.
Speculative development across North and Central New Jersey is ongoing, and we anticipate a number of legacy sites to be redeveloped during the next two- to five-year period. Of course, the 2008 recession remains on everyone’s mind. Accordingly, speculative velocity is not as robust as it was in previous cycles and is being pursued more thoughtfully. Through 2025, a steady flow of new product is expected to come online but will represent only a fraction of the northern and central market inventory, which comprises about 700 million square feet.
In addition to traditional users, much of the ongoing demand is either directly related to e-commerce or shares some overlap. Cushman & Wakefield professionals have assisted with deals involving retailers, big box and e-commerce companies, as well as food, consumer products and third-party logistics providers. Additionally, ancillary e-commerce components including paper, packaging and delivery services like FedEx, UPS and DHL are further fueling momentum in the industrial market.
Southern New Jersey
The Southern Jersey industrial region — generally defined as New Jersey Turnpike Exit 7A and south and stretching from Burlington through Salem County — has continued its expansion. Drivers include regional big-box as well as e-commerce distribution, and the tight Northern and Central New Jersey markets are helping to spur even more developers to look south. The addition of new lanes to Turnpike Interchanges 9 to 6 opened a floodgate of demand, attracting developers, institutional buyers and REITs that previously wouldn’t look south of Exit 8A because of congestion issues.
Consequently, the southern belt of the state has become a regional distribution market that today rivals the New Jersey Turnpike’s Exit 8A and Pennsylvania’s Lehigh Valley. One indication: the size of the average spec-built warehouse-distribution facility has swelled from 100,000 square feet to 300,000 square feet at the lower end, to 1 million square feet at the upper end. This evolution was highlighted in 2017 when photo, video and specialty electronics retailerB&H relocated its distribution-warehousing operations from New York City’s Brooklyn Navy Yard to Florence Township in Burlington County, where it leased a 677,000-square-foot facility.
Similar to the northern part of the state, the south’s vacancy rate is at an all-time low of about 3 percent, driving Class A rental rates to a high of about $6 per square foot. This condition is not likely to be alleviated anytime soon, despite the robust pipeline of speculativeprojects expected in the next 12 to 24 months.
The “next big thing” will probably involve rezoning from malls to industrial as more developers and others who have been shut out of Class A product in Central and Northern New Jersey move further south.