New Jersey’s Industrial Market Shows Bright Spots

New Jersey’s industrial sector is demonstrating positive progress, particularly with the increasing volume of projects in the construction pipeline. However, the metro is still facing several challenges.

As of June, 6.4 million square feet were underway, a pipeline four times the one registered during last year’s same period, CommercialEdge information shows. However, in terms of deliveries, only half of the square feet completed in the first six months of last year came online—about 4.8 million square feet across 20 properties.

The market continued to lead Northeastern metros in sales volume, reaching roughly $1.1 billion. New Jersey ranked fourth among the most expensive metros, with properties changing hands for $256 per square foot on average, and fifth for total investment.

More industrial facilities underway in New Jersey

As of June, New Jersey’s industrial sector had roughly 6.4 million square feet underway. Upon completion, these developments will represent 1.1 percent of the market’s total inventory, well below the 1.9 percent national average.

Year-over-year, the under-construction pipeline rose four times. The metro also surpassed the Inland Empire (0.7 percent of total stock) and Chicago (0.9 percent), but lagged Indianapolis (1.2 percent) and Atlanta (1.9 percent).

A total of 18 projects started construction in the first six months of the year, which are expected to measure more than 2.7 million square feet—about 0.5 percent of total stock.

In May, Matrix Development Group secured $93 million in financing for Matrix Logistics Park, a 781,748-square-foot Class A industrial project in Budd Lake, N.J. Currently under construction, the property will comprise two buildings.

Earlier this year, Bridge Industrial obtained $28.5 million in construction financing for Bridge Point South Plainfield II, a 167,281-square-foot warehouse in South Plainfield, N.J. The speculative development is set to come online in the fourth quarter of this year.

Completions almost halve year-over-year

Year-to-date through June, New Jersey’s industrial sector recorded 4.8 million square feet completed across 20 properties, accounting for 0.8 percent of total stock. Following commercial real estate trends, deliveries almost halved year-over-year, as 8.5 million square feet had come online in the first six months of 2023.

The metro outperformed Atlanta (4.1 million square feet) and Indianapolis (3.6 million square feet), but lagged the Inland Empire (18.1 million square feet) and Phoenix (17.4 million square feet).

In June, Bridge Industrial also completed Bridge Point 999, a 291,758-square-foot industrial building in South Brunswick, N.J. The developer financed the construction with a $53.5 million loan originated by Mesa West Capital at the beginning of the year.

Investment volume remains high

New Jersey’s industrial sector registered almost $1.1 billion in sales year-to-date as of June—down almost 30 percent over the year—with assets trading for $256 per square foot on average. The market remained one of the most expensive in the U.S., with prices well above the $139 national average.

The Bay Area ($570 per square foot), Orange County ($340 per square foot) and Los Angeles ($311 per square foot) are the only top-performing metros that surpassed New Jersey. The market ranked fifth nationwide for investment volume, with the Bay Area taking the spotlight once again ($2.3 billion).

At the end of February, Brookfield Properties acquired 300 John F. Kennedy Blvd. E., a 311,950-square-foot industrial facility in Weehawken, N.J., for $217 million. Digital Realty sold the asset for about $695 per square foot, almost three times the metro’s average.

Vacancy rate still on the rise

New Jersey’s industrial vacancy rate at the end of June clocked in at 7.1 percent, 100 basis points above the national average and considerably higher than the one of June 2023, when it stood at 5.2 percent.

Among peer markets, the metro had the highest vacancy rate. Chicago (7.0 percent) and Dallas (6.5 percent) were close behind, while Phoenix (5.2 percent) and Indianapolis (5.0 percent) fared better.

However, the market is still a hotspot for companies looking to expand. In July, JW Fulfillment Inc. signed a full-building lease at Arsenal Trade Center, a 1 million-square-foot campus in Sayreville, N.J. The wholesale distribution company committed to 342,371 square feet at Trammell Crow Co.’s recently completed logistics center.

The average listing rate during the same month was $10.85, a 9.6 percent increase from June last year. The market’s rate was above the $8.04 U.S. figure, but below those registered in Orange County ($15.69) and the Bay Area ($13.34).