The 164-million-square-foot Central New Jersey warehouse/distribution market is on a roll, as 352,000 square feet of net absorption in the second quarter of 2012 pushed the vacancy rate down 20 basis points to 11.7%, and another 1.2 million square feet in July and August alone left the rate at just 11.0%. The largest leases of the quarter according to Cushman & Wakefield took place in the Exit 7A/Southern Region of Mercer County. Little additional space is forecast to come on line until the 557,000-square-foot Middlesex Commerce center completes construction in Edison, perhaps not until 2013. Reis predicts the vacancy rate will remain between 11.0% and 11.5%, roundly speaking, through 2016.
In the second quarter the average asking rent rose 0.4% to $4.99 psf and the average effective rent increased 0.7% to $4.44 psf. The year-over-year gains are 1.8% and 2.1%, respectively. Rents increased another 0.4% asking and 0.7% effective by August, and Reis predicts gains of 3.0% by both measures for all of 2012. Subsequent annual increases are expected to be similar.
Trends in the 28.3-million-square-foot Flex/R&D market are similar. In the second quarter a strong 366,000 square feet of net absorption drove the vacancy rate down 130 basis points to 10.9%. That is down 310 basis points from a year earlier. The average asking rent increased 0.3% to $8.64 psf, with the average effective rent up 0.4% to $7.53 psf. The year-over-year gains were 2.0% and 2.7%, respectively, and there was no subsequent change through August. Reis predicts the vacancy rate will end 2012 at 11.4% as rents rise 2.6% for both measures over the year. Somewhat lower vacancy rates and higher rent gains will follow in subsequent years.
Cushman & Wakefield reports an overall vacancy rate of 8.6% and a direct rental rate of $4.21 psf for warehouse/distribution space and $12.68 psf for high- tech for 327 million square feet in Central New Jersey. Net absorption for the quarter is given at a strong 2.2 million according to this source. “The largest leases took place in the Exit 7A/Southern Region of Mercer County. IDS leased 499,898 square feet at 24 Applegate Drive, and Kenco Logistic Services LLC expanded by 400,714 square feet at 100 West Manor Way”