Northern New Jersey Industrial Market

With real estate development mirroring the steadily recovering economy, northern New Jersey is experiencing an increasing amount of industrial development. “We have seen positive net absorption in the last two quarters as well as an increase in rental prices,” notes Neil Gewirtzman, executive vice president at Sheldon Gross Realty Inc., headquartered in West Orange, New Jersey.

Gewirtzman adds, “There is great demand for the purchase of industrial buildings ranging from 10,000 to 50,000 square feet. The region does not have enough product currently available for purchase.”

With the current glut of buyers, the market is strong for larger properties as well. “The larger buildings are also selling for higher prices as the cap rates have dropped under 7 percent. This can be traced to the problems in the equities markets and low interest rates,” explains Gewirtzman. Many of these buildings are filling up before construction is complete, helping absorption and vacancy rates. A number of big businesses are acquiring space throughout the area. Landlords are looking for large big box users, as companies are trying to centralize inventory and keep stock low in most locations. Barnes & Noble is moving into more than 900,000 square feet of a new 1.1 million-square-foot building at Cranbury South River Road and The Home Depot is taking over 800,000 square feet of property at Mack Cranbury Road.

According to Gewirtzman, one growing market is the area around exit 8A of the New Jersey turnpike, which “continues to be developed because of available land that is more affordable than further north, and its location is equidistant between New York and Philadelphia.” In the near future, expect increased development from the always-strong port market. Industrial tenants are attracted to the area for both its water-borne transportation system and its close proximity to New York.

Developers in the region are trying to attract tenants to their properties with more flex buildings, as New Jersey becomes more and more a services state. Rental rates for typical industrial buildings range from $5 to $7 per square foot, with flex space sitting on a blended rate of more than $10. Vacancy rates are stable at approximately 7.5 percent.

With demand currently outpacing supply throughout the region, industrial development in northern New Jersey is strong and showing no signs of slowing any time soon.

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.

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