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 -NJ Industrial Market Report

During the first Quarter, Northern New Jersey Industrial Real Estate data shows the overall leasing and absorbtion of 921,766 square feet. Mainly in the Hudson and Bergen corridors- along the Hudson waterfront and centered around the Route 46/23 areas.

In the Central region, the New Jersey industrial market ended the quarter with 1.14 million sq ft of leased out space. The most activity was in the 287/Exit 10, Exit 8A and Somerset submarkets, which had a combined total of 873,496 sq ft of leased space.

‘Asking’ net lease rates in Q1 stood at $5.90 per sq ft- which represented only $0.26 less or a 4.66% decrease from the mean asking rents posted just a year ago. While the asking rents in Central New Jersey stayed basically stable, with the Trenton/295 submarket yielding the highest asking rate increase, which was up $0.18 per sq ft.

ask rents ind njOverall, gross absorbtion remains negative- around 9 million square feet of space and the overall vacancy rate stood at 9.2%- up from 8.7% Q4. Subletting activity has and continues to increase, a sign that companies are reducing their real estate holdings in this deeply troubled economy.

  • Negative Gross Absorbtion:                  9(+\-) million
  • Overall vacancy rate:                         9.2%
  • Northern NJ space leased:                   921,766 SF
  • Central NJ space leased:                     1.14 m SF

Recovery in the industrial market is expected to lag behind retail and office space which will ultimately prolong the efforts of investors and corporate holders to normalize vacancy and absorbtion rates.

Of course industrial/flex space is directly affected by retail sales and the entire retail sector, so the sooner retail rebounds- the sooner the industrial market will see recovery as well.

All of NJ real estate, commercial and residential recovery is resting on the states and the national economic climate. Depending on how quickly the country can dig itself out this current deep recession/mild depresion.

The New Jersey housing market showed that it still has a pulse as contract-sales increased by 23% in March despite the continuing stream of grim economic news. The March increase, which is the 3rd consecutive monthly sales increase, is largely due to seasonality as home sale activity typically rises in anticipation of the Spring selling season. That this year’s increase was 23%, compared with a 9% rise last March.

contract sales

A major reason behind the rise in home sales is lower home prices and lower mortgage interest rates that have raised housing affordability in New Jersey from a low of 81% in 2006 to 111% today.

The bottom line is that the current sales pace remains the lowest of the past 5 years. This is directly due to the challenges posed by a weak economy, tightened credit standards, rising food and energy costs and a high amount of unsold inventory, which presently reflects an 11-month supply.

While New Jersey is faring a bit better than most of the country, it remains to be seen if this short-term positive news can become a positive trend.

One of the most important and reliable Leading Economic Indicators in relation to the Business Cycle is Retail Sales.  Retail Sales are a major part of Consumption- a function of the business cycle and a basis for the Inflation Index as well.

Simplified, aggregate demand, a composite function of personal consumption is the largest component of  the economy, representing approximately 65% or two-thirds of GDP. Two of biggest components of GDP are- Consumer Spending and Trade.

The latest Retail Sales report is out tomorrow and the hope is for some good news. Unfortunately, sales figure reports to this point have all been bad. Shrinking household wealth as a consequence of-  debt, on-going and rising job loss, have curtailed spending to depressed levels.


The first quarter figures will likely show an approximate 2.5% year-over year drop in activity- with predicted March numbers barely in the black at 0.2%. Given that factory output shrunk, unemployment still climbing, loan delinquencies widening and drop off in auto sales- the minute increase could actually be deceiving.

One of the drivers of the predicted o.2% uptick could still be the use of gift cards that were purchased in December 2008. As consumers held on and rationed their spending during the first three months of 2009.

Crude- but effective

A couple crude measures of consumption, though maybe somewhat old-fashioned…is to keep tabs on the local Freight Train and delivery truck activity. Huh? Well, how do you think all those goods get to shelves?

As part of our local surveys, RE has noticed a decisive drop-off in freight train frequency and the length of freight cars. Additionally, the on-road saturation of trailer trucks in the central and northern NJ regions is noticeably less as well.

According to data from the NRF, forecasts for the second quarter call for further decline as well. Normally, a quarter’s worth of consistent data would be good enough to make the call for a trend-in-the-making. Although given the many conflicting data- corrections are sure to be made come Q2.

Central New Jersey class A office space is showing signs of life. With a lack of spec building in the overall market, class A vacancy rates have gone from about an appalling 20% to around  5.5%.

Recent data shows most class A units are currently leasing between $24 psf to $28 psf. Although on the flip-side, class B vacancy rates have risen to approximately 13% with lease rates around $18 to $20 psf.

Nationally, office vacancy rates have ticked upward to a four year high in the first quarter of 2009- clocking in at 15.2%. The decline in the amount of occupied space was 24.9 million square feet, the most since September 2001.


Overall vacancy rates are predicted to reach nearly 20% by years end, while effective rents in Q1 fell approximately 2% with the average rent psf at 24.16. Nearly 50 million square feet of office space is expected to be empty in 2009, but is also expected to begin to fill up in early 2010 as the economy starts its slow, but certain recovery.

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