MARKET HIGHLIGHT, FEBRUARY 2005
NEW JERSEY MARKET HIGHLIGHT
Northern & Central New Jersey Retail
Owners of open-air shopping centers and freestanding retail
buildings along Northern and Central New Jerseys primary
retail corridors headed into the 2004 holiday season in a
strong position, experiencing minimal shifts in vacancy rates
from those posted at the onset of the year.
A fall update of the annual study conducted by R.J. Brunelli
& Co. each January found the vacancy factor along the
six major retail highways in Northern New Jersey decreased
to 3.0 percent from the 3.2 percent reported in our 2003 study,
which was conducted in January 2004. Vacancies along the four
Central New Jersey corridors surveyed were unchanged at 3.8
These findings point to the resiliency of the Northern and
Central regions. Its an environment in which availabilities
triggered by chain bankruptcies or downsizings are rapidly
absorbed by newcomers, seeking to establish a presence in
these demographically appealing regions, or by existing chains,
desiring to bolster their market share.
In Northern New Jersey, Route 17 saw vacancies in its 4.49
million square feet of space rise to 4.4 percent in September
2004 from 3.7 percent in January 2004. Along Route 4, the
rate was unchanged at 1.8 percent in 1.05 million square feet.
On Route 23, vacancies in the 1.71 million square feet reviewed
grew to 2.3 percent from 1.6 percent. Route 46 saw vacancies
in the 6.0 million square feet studied dip to 3.3 percent
from 3.4 percent. Along Route 10, vacancies in the 4.68 million
square feet studied fell to 1.5 percent from 2.4 percent.
Route 22, with 7.89 million square feet of inventory, saw
its rate recede to 3.3 percent from 3.7 percent.
In Central New Jersey, vacancies on Route 35 fell from 4.7
percent to 4.0 percent in the 7.95 million-square-foot market.
Progress was also seen on Route 9, where the rate dropped
to 4.2 percent from 5.4 percent in 7.08 million square feet.
On Route 18, the rate increased to 5.1 percent from 4.9 percent
in the 2.22 million square feet studied; Route 1 saw its factor
rise to 2.7 percent from 2.5 percent in the 7.52 million-square-foot
While a dearth of developable sites has kept new development
to a minimum especially in the more densely populated
Northern region several major projects have been given
the green light or are on the horizon, underscored by Mills
Corp./Mack Calis huge Xanadu multi-use project at the
Meadowlands sports complex in East Rutherford. In Central
New Jersey, activity will be highlighted by Hartz Mountains
redevelopment of a former Ford plant in Edison into a mixed-used
project, and Manalapan Retail Realty Partners plans
for the Village at Manalapan, a town center on 135 acres with
an anticipated grand opening in fall 2006.
Richard J. Brunelli is president of R.J. Brunelli
& Company Inc. in Old Bridge, N.J.
Northern New Jersey Office Market
In Northern New Jerseys office market, the states
strong economic conditions are resulting in an overall increase
in activity. Current conditions, such as the drop in New Jerseys
unemployment rate and the addition of many new jobs to the
marketplace, are creating demand for office space from multiple
market sectors. As there is not significant office development
currently underway, the available space in Northern New Jerseys
submarkets is being leased at a rapid pace.
Many significant deals were consummated in the region in the
second half of 2004, especially in the Route 24 and I-78 corridor
submarkets, including leases on behalf of BASF, Wyeth, and
Citigroup, in addition to several transactions at the prestigious
Giralda Farms campus.
The Route 24 submarket continues to outpace other submarkets
in the state and has many development capabilities. Although
there is available space in this market, there are several
new construction opportunities for some of the states
big developers, such as The Gale Company, Advance Realty Group
and M. Alfieri Co. Inc.
In 2004, there were several occurrences where multiple tenants
were chasing a single block of space in prime property. The
strongest demand has been in the highest quality properties
such as Giralda Farms, Park Place and Warren Corporate Center.
In most markets, the excess of sublease space continues to
drop, although it still remains at levels above historical
averages. Despite these factors, rental rates have not been
increasing, though concession packages are frequently becoming
The economy is experiencing a steady growth pattern and the
state has made up all the jobs lost during the recession.
There have been a number of new companies coming into the
market. As companies continue to invest and cultivate their
businesses, the market will reflect further improvement. This
breeds confidence that these trends will continue and provide
a strong market in years to come, eventually returning to
levels seen prior to the recession.
Leo Paytas is with Trammell Crow Company.
New Jersey Industrial Market
The industrial market in New Jersey is thriving with new
development, drastically changing the landscape of industrial
product in the state. By far the greatest trend in the market
is new product being built in close proximity to Port Newark/Elizabeth,
which has until now been dominated by older buildings with
lower ceiling heights and limited trailer parking. Over the
next 2 years, however, major submarkets as close to the ports
as Exits 13A, 15W, 14 and 12 on the New Jersey Turnpike are
experiencing an inundation of new development consisting of
millions of square feet of modern distribution and warehousing
centers. These facilities are increasingly boasting 36-foot
clear ceilings, precast concrete walls, and as many doors
and trailer parking spaces as possible.
This trend points fixedly toward infill development on a large
scale and specifically catering to the expected growth the
ports will experience in the next 15 years as the Port begins
to accept larger vessels and more freight. These are significant
projects, including Catellus 1 million-square-foot,
three-building complex at Exit 13A, and, already underway,
its Port Reading Business Park at Exit 12, a 3 million-square-foot
development on 290 acres. The first building, totaling 360,000
square feet, will come online as early as April 2005. At the
revamped Exit 12 interchange, another national developer,
Panattoni Development, is developing I-Port 12, a 140-acre,
3 million-square-foot complex. Further south, its I-Port 440
will comprise 2 million square feet. New development at Exit
13A could possibly see rental rates in the range of $7 to
$8 per square foot, which is unprecedented for this market.
However, with vacancy rates hovering at 7.6 percent in this
submarket and newer facilities drawing attention, numbers
such as these might become more commonplace in 2005 and through
2007. In addition to these mammoth projects, Morris Companies,
Adler Development, Russo Development and others have proposed
developments in the expanded Port area.
The impact of these developments is indisputable. They will
create a sharp increase of Class A industrial product, serving
more of Northern New Jersey than before and thus enticing
certain companies to remain close to the ports instead of
moving to Central New Jersey in search of quality facilities.
As of December, the Carteret market alone experienced a 2.78
percent vacancy rate, more than justifying new development.
However, the development of large regional distribution centers
in Central New Jersey is a trend that will continue as long
as there is land available between Exit 8A and Exit 7. Companies
such as Rockefeller Group, ProLogis, Matrix, Forsgate, Opus
East and Greenfield Builders continue to develop throughout
that market. With rental rates between $4.25 and $4.75 per
square foot, Exit 8A is highly competitive, even with the
15 percent increase in rental rates for existing facilities
over the past year.
Regional distribution areas of Exit 8A, Exit 7A and the extended
Port Area offer key strategic advantages for moving goods
in and out of the country and throughout the corridor between
Boston and Washington, D.C. New Jersey continues to stand
next to Southern California and the Chicago area as one of
the premier industrial markets in the country.
Robert Kossar, SIOR, is an executive vice president
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