M A R K E T B E AT

ECONOMY: Robust Ecommerce Sales & Strong Port Activity Fuel the MarketWith tensions surrounding the U.S.-China trade war subdued, cargo volume at the Port of NY/NJ persisted at a brisk rate, with the amount of TEUs handled in 2019 up 6.0% compared to 2018. Meanwhile, consumer confidence remained healthy during the winter and online sales continued to trend higher, up 5.0% since the previous quarter and 16.9% compared to year-end 2018. Almost $155 billion worth of goods were purchased online, a record high, which helped propel the New Jersey warehouse market to new heights. As a result of the strong demand for next day and same day delivery in the NYC Metro region, transportation and warehousing employment has climbed by 5,300 jobs this past year, a 2.5% increase.

OVERVIEW: Another Historic Year for One of the Nation’s Gateway Industrial MarketDespite limited existing Class A big-box warehouse space options throughout much of 2019, the New Jersey industrial market boasted one of its best years on record once again. Annual new leasing activity reached one of its highest marks this decade. Absorption totals, while not quite as robust as the previous three years, closed 2019 strongly, and both asking rents and vacancy continued to reach new historic levels. All of this has been propelled by the strong NYC-metro job market, healthy consumer confidence, stout port activity, and increasing eCommerce sales showing no signs of slowing down as demand for both major distribution centers and last mile delivery facilities has persevered in the region.

SUPPLY & DEMAND: Vacancy Rates Continue to Fall While Absorption Totals Remain HealthyOverall net absorption failed to reach the 10.0-million square foot (-msf) mark for the first time since 2013. However, this was not due to a lack of demand or excess space returns to the marketplace, but instead to the lack of quality, existing space options vacant in many parts of the Garden State. A significant portion of the recorded year-to-date occupancy gains were due to the deliveries of large warehouses which had tenants already in place. Overall vacancy once again hit a new historical low of 2.8%, down 40 basis points compared to the close of 2018. On the submarket level, seven of the eight primary New Jersey Turnpike markets now boast sub-3.0% warehouse vacancy rates, including Lower 287 at 1.7%, Upper 287 at 1.4%, Exit 8A at 0.2% and Exit 7A/8 where there are zero vacancies.

2.8%Vacancy Rate

9.8MNet Abs. YTD, SF

$9.42Asking Rent, PSF

ECONOMIC INDICATORSQ4 2019

3.4%

12-Mo. Forecast

New Jersey Unemployment Rate

4.4MNew Jersey Employment

3.6%U.S. Unemployment Rate

12-Mo. Forecast

SPACE DEMAND / DELIVERIES OVERALL VACANCY & ASKING RENT

YoY Chg

Source: BLS

YoY Chg

Overall, Net Asking Rent

NEW JERSEYIndustrial Q4 2019

02468

10121416

2016 2017 2018 2019

Milli

ons

(sf)

Net Absorption, SF Construction Completions, SF

0%1%2%3%4%5%6%7%8%

$0

$2

$4

$6

$8

$10

2016 2017 2018 2019

Asking Rent, $ PSF Vacancy Rate

M A R K E T B E AT

NEW JERSEYIndustrial Q4 2019

PRICING: Asking Rental Rates Once Again Reach Unchartered Territory As space tightened further in the final months of 2019, landlords once again responded with rental rate increases. For warehouse space, the average direct rental rate ticked higher to $8.90 per square foot (psf), a new historic high, and has now risen by 27.1% over the last three years. The Meadowlands submarket remained the priciest in the state at $11.18 psf, while the Port Region’s average hit double digits for the first time on record at $10.16 psf. Furthermore, new construction continued to be priced at a premium compared to those existing spaces throughout the marketplace.

CONSTRUCTION: Vigorous Pre-leasing Activity Persists Within New Warehouse SupplyWhile new construction deliveries failed to reach the century high marks of the previous two years, there was a healthy 6.6 msf of new warehouse facilities completed throughout the year, 76.3% of which was pre-leased. The majority of new product was greater than 250,000 sf, including three facilities over 500,000 sf. Meanwhile, more than 10.0 msf of industrial product is under development, much of which will be completed in 2020, marking a new century-high mark. The bulk of the developments lie within Central New Jersey from Exits 12 down to Exit 8A. Pre-leasing activity for projects under construction remains extremely healthy at 65.6%. There are seven projects underway greater than 500,000 sf, accounting for 53.5% of the square footage being built.

DEMAND: 3PL & eCommerce Tenant Demand Propel Big-Box Turnpike TransactionsAfter a tame third quarter for new leasing activity, tenant demand bounced back impressively to finish 2019. Just over 7.0 msf of new leases were inked throughout the fourth quarter, marking the third quarter in 2019 when the market recorded more than 7.0 msf in deal activity. The robust quarter pushed the annual total to 26.6 msf, the second-highest total recorded this past decade, propelled by seven transactions greater than 500,000 sf. Of these deals, five occurred within projects which were not yet completed. Furthermore, with big-box existing Class A options scarce, 10 of the 26 deals inked this past year greater than 200,000 sf were within warehouse facilities not yet built. eCommerce and logistics companies continued to comprise the bulk of big-box demand this year and the appetite for last mile and local distribution centers persisted along the New Jersey Turnpike infill markets. Exit 8A was again the epicenter for substantial leases, accounting for approximately one quarter of year-to-date. Renewal activity was strong throughout 2019 as well, including 16 renewals transacted greater than 200,000 sf.

0.02.04.06.08.0

10.012.0

MSF

Historical Average=4.6 MSF

NEW SUPPLY

-15.0-10.0-5.00.05.0

10.015.020.0

HISTORICAL NET ABSORPTION

3.5

1.70.9

4.4

1.16.8

0.7

2.8

2.5MeadowlandsPort RegionExit 13Lower 287 (Exit 10-12)Exit 9Exit 8AExit 7A/8Upper 287Other

YTD WAREHOUSE LEASING BY SUBMARKET

Outlook

• Existing Class A big-box options will remain limited throughout the marketplace, thus keeping pre-leasing activity of new developments in 2020 at historically high levels as steady tenant demand continues in the near-term against the already record low vacancy levels.

• The modest, steady upward trajectory of the national and local economies will continue to have a positive impact both on the Port of NY/NJ activity and New Jersey industrial marketplace. Expect asking rents along the turnpike rise even further and core submarkets to yield further, but nominal improvements.

M A R K E T B E AT

KEY LEASE TRANSACTIONS Q4 2019PROPERTY SF TENANT PROPERTY TYPE SUBMARKET

50 Veronica Avenue, Franklin Township 926,362 LG Electronics Warehouse/Distribution Upper 287 Corridor

1000 Industrial Avenue, Keasby 695,000 East Coast West Coast Logistics* Warehouse/Distribution Lower 287 Corridor

315 Half Acre Road, Cranbury 650,123 Cooper Friedman Electric Supply Company Warehouse/Distribution Exit 8A

25 South Middlesex Avenue, Monroe Township 411,600 XPO Logistics* Warehouse/Distribution Exit 8A

*Includes renewal

KEY PROJECTS UNDER CONSTRUCTIONPROPERTY SF DEVELOPER PROPERTY TYPE MAJOR TENANT SUBMARKET343 Half Acre Road, Cranbury 953,595 Alfieri Warehouse/Distribution Confidential Exit 8A

50 Veronica Avenue, Franklin Township 926,362 Crow Holdings Industrial Warehouse/Distribution LG Electronics Upper 287 Corridor

10 Route 27, Edison 900,022 The Rockefeller Group Warehouse/Distribution Speculative Lower 287 Corridor

353 Half Acre Road, Cranbury 870,950 Alfieri Warehouse/Distribution Confidential Exit 8A

MARKET STATISTICS

NEW JERSEYIndustrial Q4 2019

SUBMARKET TOTAL BLDGS

INVENTORY (SF)

YTD LEASING ACTIVITY

(SF)

YTD USER SALE ACTIVITY

(SF)

OVERALL VACANCY

RATE

YTD NET OVERALL

ABSOPRTION (SF)

UNDER CNSTR (SF)

OVERALL WEIGHTED AVG. NET RENT (HT)

OVERALL WEIGHTED AVG. NET RENT (MF)

OVERALL WEIGHTED AVG. NET RENT (W/D)

Bergen County 1,296 86,036,878 3,640,316 428,521 3.7% 463,086 0 $10.03 $7.25 $9.49

Essex County 677 45,006,635 1,186,960 0 2.2% 446,324 661,530 $10.81 $8.51 $10.08

Hudson County 524 73,547,950 1,445,890 50,000 3.7% -185,828 603,876 $14.38 N/A $11.74

Morris County 471 41,713,241 913,691 60,160 7.0% 659,259 0 $20.38 $5.50 $7.73

Passaic County 474 41,258,266 940,614 216,261 3.2% 1,145,093 250,000 $5.50 $9.49 $8.49

NORTHERN NJ TOTAL 3,442 287,562,970 8,127,471 754,942 3.9% 2,527,934 1,515,406 $14.96 $7.53 $9.45

Mercer County 247 31,955,450 1,083,204 0 4.7% 938,112 786,720 $9.47 $3.98 $4.53

Middlesex County 1,666 215,487,775 13,307,351 1,368,196 1.3% 4,784,115 5,253,010 $14.72 N/A $8.29

Monmouth County 181 13,555,368 254,359 0 5.3% -46,508 0 $11.67 N/A $8.16

Somerset County 406 34,897,617 2,223,003 304,991 1.8% 226,076 2,418,710 $14.49 $9.50 $8.94

Union County 664 57,489,436 1,647,687 899,524 2.1% 1,366,658 154,802 $15.50 $10.14 $9.50

CENTRAL NJ TOTAL 3,164 353,385,646 18,515,604 2,572,711 1.9% 7,268,453 8,613,242 $13.16 $6.37 $8.43

NEW JERSEY TOTALS 6,606 640,948,616 26,643,075 3,327,653 2.8% 9,796,387 10,128,648 $13.97 $7.29 $9.04 *Rental rates reflect weighted net asking $psf/year **Leasing activity totals do not include renewals

HT = High Tech/Flex MF = Manufacturing W/D = Warehouse/Distribution

M A R K E T B E AT

NEW JERSEYIndustrial Q4 2019

INDUSTRIAL SUBMARKETS

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A CUSHMAN & WAKEFIELD RESEARCH PUBLICATIONCushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services.

©2020 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

JASON PRICEDirector—Tri-State Industrial ResearchTel: +1 201 508 5208jason.price@cushwake.com

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