MARKETVIEW

New Jersey Industrial, Q1 2020

Lack of large deals leads to

leasing slowdown for Q1 2020
Leasing Activity Net Absorption Availability Rate Class A Avg. Asking Rent
3.8 MSF .78 MSF 6.1% $7.52

Arrows indicate change from previous quarter.

• The average asking rent for Class A industrial space
in Northern and Central NJ decreased to $10.36 per
sq. ft., down 1% from the prior quarter but up 3.8%
year-over-year.
• Average asking rent for all property classes was stable
quarter-over-quarter at the all-time high of $7.52 per
sq. ft., an increase of 3.7% from one year ago.
• First quarter leasing activity was 3.8 million sq. ft., a
56% decrease from Q4 2019 and 44% less than Q1
2019 due to smaller lease sizes.
• The availability rate for all classes eased by 10 basis
points (bps) to 6.1% from Q4 2019 and dropped 30
bps from Q1 2020.
MARKET OVERVIEW
The New Jersey industrial market experienced a
noticeable slowdown in leasing activity during the
first quarter, recording its lowest level since Q4
2012. Despite strong demand coming into the year,
there were few large deals closed in New Jersey’s
tight industrial market. After a strong Q4 2019,
leasing activity slowed in Q1 2020 to 3.8 million sq.
ft., 56% less than the previous quarter and 44%
less year-over-year. The COVID-19 pandemic
forced some occupiers to slow their leasing plans
amid economic uncertainty and reconsider any
long-term commitments, however several
e-commerce, third-party logistics (3PL) and
medical companies moved forward with
transactions in progress.

The average asking rent for Class A space decreased

to $10.36 per sq. ft., a 1% decline from its all-time
peak in Q4 2019 but was 4% greater than Q1 2019’s
average. Taking rents for premier space in
Northern NJ closed between $13 -14 per sq. ft. in
the high-demand areas of the Meadowlands,
Hudson Waterfront and Newark. Top taking rents
in Central NJ ranged between $10-12 per sq. ft. for

Figure 1: Q1 2020 Notable Transactions

Size (SF) Tenant Address City Type
570,000 US Elongistics 703 Bartley Chester Road Flanders New Lease
318,000 E-Commerce Tenant 1800 Lower Road Linden New Lease
190,000 Topaz Lighting 130 Interstate Boulevard Monroe New Lease
185,000 E-Commerce Tenant 1 Paddock Street Avenel New Lease
Source: CBRE Research, Q4 2019.

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 MARKETVIEW NEW JERSEY INDUSTRIAL
well-designed modern space in the sought-after
submarkets of Linden/Elizabeth, Carteret Avenel
and Route 287/Exit 10. Pricing remained strong for
all product types as overall average asking rents
were largely unchanged from Q4 2019 at $7.52 per
sq. ft.
The Q1 2020 availability rate in the combined
Northern and Central NJ markets increased to
6.1%, 10 bps higher than Q4 2019’s historically low
rate of 6.0% and 30 bps higher year-over-year.
Despite the low-level of leasing during the quarter,
net absorption reached 782,131 sq. ft. due to the
delivery of several fully leased buildings, which
subsequently added to the occupied inventory.
The development pipeline expanded 4.2 million sq.
ft. to 14.5 million sq. ft. during Q1 2020, the largest
amount CBRE has recorded since 2009. The
pipeline expanded by nearly four million sq. ft. as
investors pushed projects forward to maximize
returns in a strong market with record rents.
However, New Jersey Governor Phil Murphy issued
an executive order on April 8th that halts all
non-essential construction effective April 10th to
combat the spread of COVID-19. The impact of
this order is being assessed as construction
projects that involve industrial facilities that
distribute, store or service goods or products sold
through online retail or at essential retail
businesses may be allowed to continue.
ECONOMY AND BUSINESS TRENDS
The COVID-19 pandemic has forced New Jersey
and several other state governments to impose
strict stay-at-home orders that are adversely
affecting many industries. This is leading the U.S.
economy into a recession that will result in very
sharp declines in GDP for H1 2020 and in job
losses, particularly in the hospitality, retail/food &
beverage and transportation sectors. The unique
nature of this downturn should result in an
unusually swift recovery that could begin as early
as Q3 2020. Assuming the coronavirus peaks this
summer in the U.S.—mirroring China’s
Q1 2020 CBRE Research ©2020 CBRE, Inc. | 2
experience—the U.S. government’s fiscal and
monetary stimulus will begin to bear fruit. This
will be paired with pent-up private demand that
could help the U.S. economy return to growth by
year-end and drive stronger than previously
expected growth in 2021.
RENT TRENDS
The average asking rent for all classes of space in
Northern and Central NJ during Q1 2020 was $7.52
per sq. ft., virtually unchanged from the record
high of $7.53 per sq. ft. set in the previous quarter,
and 3.7% higher year-over-year. The Northern NJ
overall average asking rent was stable from Q4 2019
at $7.99 per sq. ft. and increased 1% from Q1 2019.
At $6.85 per sq. ft., the average asking rent in
Central NJ was also stable compared to Q4 2019 but
increased 6.7% year-over-year.
Figure 2: Quarterly Average Asking Rent
($/SF)
8.5
8
7.5
7
6.5
6
5.5
5
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Northern NJ Central NJ
Source: CBRE Research, Q1 2020.
The average asking rent for available Class A space
in Q1 2020 was $10.36 per sq. ft., largely unchanged
from the preceding quarter and a 3.8% increase
from the prior year when the average asking rent
was $9.98 per sq. ft.
The Class A average asking rent in Northern NJ was
$12.23 per sq. ft. with the Meadowlands submarket
posting the highest average at $14.43 per sq. ft.
The average asking rent for Class A properties in
Central NJ was $9.99 per sq. ft., with Linden/
Elizabeth posting the highest average at $12.01 per
sq. ft.
 MARKETVIEW NEW JERSEY INDUSTRIAL

LEASING ft., while e-commerce market activity was carried

After ending the year strong with 8.7 million sq. ft. by three leases from the world’s biggest online
of leasing activity, Northern and Central NJ retailer. Pharmaceutical companies were the third
declined in Q1 2020 to 3.8 million sq. ft., a decrease most active industry with 296,000 sq. ft.
of 56% compared to Q4 2019 and a 44% decrease
year-over-year. The number of industrial leases Figure 3: Q1 2020 Transactions by Industry
signed over 100,000 sq. ft. in the first quarter was
almost equal to the number signed in Q4 2019 3%
6%
– the real difference was in the average size, which
6%
declined from 334,000 sq. ft. to 193,000 sq. ft. with
relatively few leases over 250,000 sq. ft.
7%

Renewals accounted for 1.23 million sq. ft. in Q1 45%

2020, 21% greater than the renewal total for Q4 7%
2019, but 13% less year-over-year.
8%
Leasing activity in Northern NJ (2.20 million sq. ft.)
exceeded Central NJ (1.61 million sq. ft.) for the
first time since Q4 2012. Northern NJ leasing was 18%
led by the Morris Region submarket where a
570,000 sq. ft. lease by U.S. Elogistics and three 3PL/Logistics E-Commerce
other commitments over 100,000 sq. ft. led the Pharmaceuticals Paper, Pulp & Packaging
submarket to 1.15 million sq. ft. in leasing activity
Other Construction Materials
for the quarter.
Consumer Goods Food/Beverage
Pre-leasing activity in Q1 2020 was mild compared
Source: CBRE Research, Q1 2020.
to the previous quarter’s total of 1.7 million sq. ft.
Only two major pre-leases were signed for a
combined 328,000 sq. ft.—357 Wilson Ave. in
Figure 4: Quarterly Leasing Activity
Newark (143,000 sq. ft.) and 1 Paddock St. in Avenel
($/SF)
(185,000 sq. ft.).
6

5
Central NJ posted leasing activity of 1.61 million
4
sq. ft. in Q1 2020. Despite having a greater
3
inventory of modern, well-developed spaces and a
2
large pipeline of Class A space available for pre-
1
lease, larger leases were less common compared to
0
Northern NJ. Only one lease over 250,000 sq. ft.
Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

was signed, compared to five in the previous

Northern NJ Central NJ
quarter and no leases exceeded 300,000 sq. ft.
compared to two such leases in Q4 2019. Source: CBRE Research, Q1 2020.

Leasing activity by industry showed 3PL as the

prime driver of demand. 3PL companies signed ten
leases during the quarter totaling 1.3 million sq.

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 MARKETVIEW NEW JERSEY INDUSTRIAL

NET ABSORPTION AND AVAILABILITY Figure 6: Quarterly Availability

Net absorption was positive 782,000 sq. ft. in Q1 ($/SF)
2020, the thirteenth straight quarter of positive net 32
absorption. The largest contributors were the 30
Newark submarket, which had net absorption of 28
524,819 sq. ft., and the Route 287-Exit 10 26
submarket with 462,000 sq. ft. Despite the low 24
leasing activity, net absorption was fairly strong
22
due to several fully-leased properties finishing
20
construction and adding 1,380,000 sq. ft. of

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020
occupied inventory. Without these transactions,
Northern NJ Central NJ
Q1 2020 net absorption would have been negative
598,000 sq. ft. Source: CBRE Research, Q1 2020.

Total availability increased by 497,000 sq. ft., UNDER CONSTRUCTION

pushing the availability rate up 10 bps to 6.1% New construction activity continued its expansion
from 6.0% in the previous quarter. Despite the in Q1 2020. At the end of the quarter, 38 buildings
uptick, the quarter’s availability rate was still 30 totaling 14.5 million sq. ft. were under
bps lower year-over-year. construction, up from 28 buildings and 10.3
million sq. ft. in the prior quarter. Additionally,
The breakdown of inventory additions was more completions in Northern and Central NJ reached
favorable to tenants looking for larger spaces 1.5 million sq. ft., the highest level since Q2 2019.
compared to the previous quarter, as there were Northern NJ recorded 1.2 million sq. ft. of
twelve additions of 150,000 sq. ft. or greater, completions during Q1 2020, the highest total for
compared to eight additions in Q4 2019. Northern NJ in CBRE records dating back to 2000.
Two buildings totaling 579,000 sq. ft. were
Figure 5: Quarterly Absorption
completed in the Hudson Waterfront submarket
($/SF)
during the quarter—50 Central Ave (416,000 sq. ft.)
6
and 99 Avenue A- Building B (188,000 sq. ft.). 429
5
4 Delancy St, at 662,000 sq. ft., was completed in the
3 Newark submarket. The only completion in the
2 Central NJ submarket was 1601 Livingston Ave. at
1
300,000 sq. ft.
0
-1
-2 The status of active construction projects could
Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

potentially be impacted by New Jersey Governor

Northern NJ Central NJ Phil Murphy executive order issued on April 8th
Source: CBRE Research, Q1 2020. halting all non-essential construction effective
April 10th to combat the spread of COVID-19. The
impact of this order is being assessed as
construction projects that involve industrial
facilities that distribute, store or service goods or
products sold through online retail or at essential
retail businesses may be allowed to continue.

Q1 2020 CBRE Research ©2020 CBRE, Inc. | 4

 MARKETVIEW NEW JERSEY INDUSTRIAL

Figure 7: Quarterly Deliveries

(MSF)
5

0
Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020
Northern NJ Central NJ

Source: CBRE Research, Q1 2020.

INVESTMENT SALES
The industrial investment sales market picked up steam early in the year with 2.45 million sq. ft. sold, up
960,000 sq. ft compared to Q4 2019. The $169 million portfolio sale of four Carteret properties to Prologis
accounted for 805,000 sq. ft. of the quarter’s total industrial investment sales. The mix of investor-to-user
purchases, as measured by square-feet acquired, heavily favored investors by a margin of 83% to 17%.
Geographically, Central NJ claimed more sales by sq. ft.—1.5 million sq. ft. in Central NJ compared to
Northern NJ’S 950,000 sq. ft.

THINGS TO NOTE

All historic data relating to leasing activity and leasing velocity have been revised since original publication. The revisions are based on a change in terminology
that went into effect January 1, 2018. As of this date, all reports by CBRE Tri-State use the term leasing activity to refer to the total amount of new square footage
leased in the market within a specific time period, including all new leases, expansions and all pre-leasing, but excluding renewals. Also, the term leasing velocity
is used to refer to all leasing activity and renewals.

Effective July 1, 2018, all historical absorption figures have been revised since original publication to more accurately reflect the state of the New Jersey
Industrial market.

Class A Avg. Asking Rent includes all Existing, Under Construction and Planned properties with availability.

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 MARKETVIEW NEW JERSEY INDUSTRIAL

Figure 8: Market Statistics

Class A Avg. All Space Avg.

Market Rentable Availability Rate Leasing Activity Net Absorption
Submarket Asking Rent Asking Rent
Area (SF) (%) (SF) (SF)
($/SF) ($/SF)

Central Bergen 31,357,676 7.49 14.00 8.87 0 -36,815

Fairfield Market 18,530,665 7.39 - 8.11 0 56,558
Hudson Waterfront 64,756,836 6.13 14.29 7.26 407,222 283,117
Meadowlands 93,939,817 7.22 14.43 9.29 322,242 -739,870
Morris Region 42,784,712 7.61 9.46 7.54 1,151,050 451,389
Newark 53,131,699 5.90 13.75 6.75 142,972 524,819
North East Bergen 7,971,744 8.00 - 8.01 42,000 46,960
North West Bergen 19,073,458 7.52 - 8.34 0 -142,909
Route 23 North 553,533 4.31 - N/A 0 0
Route 280 Corridor 3,815,100 1.18 - N/A 0 0
Route 46/23/3 Interchange 57,629,592 6.16 14.00 7.51 66,157 -188,923
Suburban Essex 12,070,135 2.98 - 4.37 71,576 121,942
Northern New Jersey 405,614,967 6.54 12.23 7.99 2,203,219 376,268
Brunswicks/Exit 9 25,906,526 5.62 9.06 7.84 55,317 243,175
Carteret/Avenel 25,810,509 6.10 11.95 7.45 342,496 19,000
Central Union 25,145,322 6.46 - 6.74 0 -88,908
Exit 8A 78,206,632 4.42 8.63 7.96 190,000 -17,073
Hunterdon 6,398,635 12.56 7.95 3.01 0 0
Linden/Elizabeth 45,709,053 4.87 12.01 7.52 424,969 459,369
Monmouth 24,739,010 7.23 10.50 7.95 0 -132,063
Princeton 11,716,960 8.12 7.75 6.57 0 -100,940
Route 287/Exit 10 105,623,064 4.00 10.20 7.43 426,139 461,950
Route 78 East 9,783,021 7.08 - 5.10 50,000 -5,100
Somerset 38,016,826 9.32 8.47 7.24 121,473 -433,547
Trenton/295 30,438,586 6.09 7.95 5.20 0 0
Central New Jersey 427,494,144 5.66 10.00 6.85 1,610,394 405,863
New Jersey TOTAL 833,109,111 6.09 10.36 7.52 3,813,613 782,131

Source: CBRE Research, Q1 2020.

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 MARKETVIEW NEW JERSEY INDUSTRIAL

Figure 14: New Jersey Industrial Submarkets CONTACTS

Nicole LaRusso
Director, Research & Analysis
+1 212 984 7188
Nicole.LaRusso@cbre.com

Brian Klimas
Field Research Manager
+1 201 712 5633
Brian.Klimas@cbre.com

CBRE OFFICES
Saddle Brook
Park 80 West, Plaza Two
250 Pehle Avenue, Suite 600
Saddle Brook, New Jersey 07663

East Brunswick
Two Tower Center Boulevard, 20th Floor
East Brunswick, New Jersey 08816

1. Route 23 North 13. Route 78 East

2. North West Bergen
3. North East Bergen
4. Morris Region
5. Route 46/23/3 Corridor
6. Central Bergen
7. Fairfield Market
8. Route 280 Corridor
9. Suburban Essex
10. Meadowlands
11. Hunterdon
12. Somerset
Florham Park
14. Central Union
15. Linden/Elizabeth 100 Campus Drive
16. Newark Florham Park, New Jersey 07932
17. Hudson Waterfront
18. Princeton
19. Brunswicks/Exit 9 To learn more about CBRE Global Research, or to
20. Route 287/Exit 10 access additional research reports, please visit the
21. Carteret/Avenel Global Research Gateway at:
22. Trenton/295
www.cbre.com/researchgateway.
23. Exit 8A
24. Monmouth

DEFINITIONS

Asking Rent: Weighted average asking rent.

Availability Rate: The amount of space currently being marketed for lease, divided by the total current inventory of built space in the market, expressed as a percentage.
Leasing Activity: Total amount of sq. ft. leased within a specified period of time, including new deals, expansions, and pre-leasing, but excluding renewals.
Leasing Velocity: Total amount of sq. ft. leased within a specified period of time, including new deals, expansions, and pre-leasing and renewals.
Net Absorption: The change in the amount of occupied sq. ft. within a specified period of time.
Percentage of Leasing by Industry: The percentage of sq. ft. leased by an industry based on transactions where a tenant and industry have been confirmed.
Taking Rent: Actual, initial base rent in a lease agreement.
Vacancy: Unoccupied space available for lease.

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