Central Jersey Industrial Real Estate Market Defies Economic Concerns

After a slight downturn at the beginning of 2024, North and Central Jersey's industrial sector experienced a resurgence in the second quarter. According to CBRE’s New Jersey Industrial Figures report, 5.9 million square feet of industrial space were leased, marking a 16% increase from the previous quarter.

Growth Driven by Smaller Tenants

The report highlights strong demand from smaller tenants, especially third-party logistics (3PL) companies, which comprised 47% of the market’s leasing activity. This demand contributed to a positive absorption rate of 1.7 million square feet, leading to the first increase in occupancy since early 2023. Although the vacancy rate rose slightly by 10 basis points to 5%, this was due to the introduction of two million square feet of new space, marking the slowest vacancy increase since last year.

Resilience Amid Economic Challenges

Despite economic uncertainties and inflation earlier in the year, New Jersey's industrial market has shown resilience. CBRE’s Chad Hillyer noted that 3PL and food and beverage companies played a significant role in the quarter’s leasing activity, particularly in the 50,000 to 100,000 square-foot range. The absorption of 1.6 million square feet of space in newly built properties indicates a favorable climate for developers.

Notable Leasing Activity and Market Dynamics

The quarter saw significant leases, including DSV’s 355,000 square-foot lease at 300 Salt Meadow Road in Carteret and JW Fulfillment’s 342,000 square-foot lease at 99 Callahan Boulevard in Sayreville. Although the vacancy rate saw a slight uptick, sublease availabilities increased to 6.5 million square feet, the highest since late 2020. Average asking rents remained stable, with Class A space at $19.40 per square foot, while rents for Class B and C spaces increased by 3%, reaching $16.62 per square foot due to strong demand for smaller units.