By Jason M. Crimmins, CCIM, SIOR, The Blau & Berg Company
Since the fall of 2022, our guiding mantra has been “Survive until 2025.” We have observed an extraordinary array of unprecedented events arising from the pandemic, which ignited an insatiable demand within the logistics sector. By the close of 2022, we began to perceive a rebalancing that we anticipated would take two to three years to achieve. Consequently, we are optimistic about a resurgence beginning in the second quarter of this year.
The year 2024 presented many external factors that pressured the real estate market. Election years are characteristically tumultuous, with fluctuating interest rates impacting lending practices and a prolonged period of elevated inflation fostering uncertainty in the broader economy, which left considerable capital on the sidelines. As anticipated, following the election’s conclusion, we witnessed a notable uptick in activity. This resurgence is often less about the political landscape and more about the fiscal clarity developers and investors seek. Notably, the leasing velocity has improved since the election.
Several indicators suggest a promising outlook for 2025, particularly the stabilization of vacancy rates as we conclude 2024. The vacancy rate of 7.5% in the third quarter held steady into the fourth quarter. With a tightening development pipeline and relatively robust occupancy rates, there are compelling reasons to believe the current tenant market may gradually shift back toward equilibrium by the end of 2025.
We continue to witness remarkable resilience and strength within the Industrial Outdoor Storage (IOS) and warehousing sectors. The market surrounding the ports of Newark and Elizabeth, as well as along the New Jersey Turnpike, remains competitive. Recognizing that the first quarter of any year typically represents the slowest period across most commercial real estate sectors is essential. Nevertheless, we have experienced a vigorous start to 2025; particularly noteworthy is the heightened interest in larger facilities within the region. While there was a time when assets ranging from 25,000 to 75,000 s/f attracted the most demand, we are now witnessing a growing interest in larger spaces. Notably, in the past four weeks, we have observed a significant surge in touring activity for the 103,912 s/f and 196,087 s/f facilities at the Elizabeth Metropolitan Logistic Center. Their strategic location—just four miles from the Elizabeth Port and Newark Liberty International Airport—coupled with the availability of 84 additional trailer stalls, undoubtedly enhances its appeal and underscores the advantages of this prime logistical hub.
While it is prudent to maintain a stance of cautious optimism, we are genuinely excited about the prospects for 2025, given the current market trends and our early-year activity. We anticipate that the data will narrate a compelling story of a market in recovery by the end of the year.
Jason M. Crimmins, CCIM, SIOR is president of The Blau & Berg Company, a full-service real estate firm located in Short Hills, New Jersey.