The 174-million-square-foot Northern New Jersey warehouse/distribution space market is prospering. In the second quarter a strong 556,000 square feet of positive net absorption pushed the vacancy rate down 30 basis points to 13.2%, which was down 100 from a year earlier. The average asking rent rose 0.7% to $5.62 psf, while the average effective rent increased 0.8% to $4.97 psf, reducing the year-over-year loss to 1.1% and 1.8%, respectively. In August a 180,000-square-foot facility for Wakefern Food Corporation completed construction in Newark, but with demand remaining strong the vacancy rate fell to 13.0% that month as rents were essentially flat. Reis reports 1.5 million square feet under construction in three projects, including another Wakefern Food facility in Elizabeth and a Goya Foods warehouse in Jersey City.
The 26.8-million-square-foot Flex/R&D segment of the Northern New Jersey industrial market is improving more slowly. The vacancy rate of 13.2% for the second quarter was well below the U.S. average, but unchanged from the quarter before and down just 20 basis points from a year earlier. New supply is absent from this segment of the market, but net absorption had been weak in the first half of the year. The 125,000 square feet of net absorption in July and August, however, pushed the vacancy rate down to 12.7%. Rents were essentially unchanged both in the second quarter and in July and August, with the asking and effective averages for the quarter at $8.36 psf and $7.20 psf. No Flex/R&D space is under construction following the completion of a 98,040-square-foot headquarters for Thorlabs Inc. in Newton in January 2012.
The forecast for both segments is similar according to Reis, with little change in vacancy through year-end 2012 followed by a modest decline amidst improved demand and increased new supply. Year-end 2016 rates are forecast at 12.5% for warehouse/distribution and 11.7% for Flex/R&D. Warehouse/distribution rents are forecast to rise 1.8% by both measures for all of 2012, while gains of 1.2% asking and 1.7% effective are predicted for Flex/R&D. Annual gains of around 3.5%, slightly less asking and slightly more effective, are forecast to commence for both segments starting in 2014.
Cushman & Wakefield reports a second quarter 2012 overall vacancy rate of 9.9% and a direct weighted average asking rent of asking rent of $5.83 psf for warehouse/distribution space and $8.75 for high-tech, in Northern New Jersey.