NAI James E. Hanson’s 2Q 2025 Industrial Report

Economic Overview

The U.S. economy remained resilient during the first half of 2025 despite many challenges including moderating job growth, stubborn inflation and wavering tariff policies. During the first six months of the year job growth was steady with the unemployment rate hovering in the 4.0%-4.2% range. Constant changes in trade policy, however, have done little to lower concerns about inflation which remains persistent and above the Federal Reserve’s target of 2.0%. Consumer confidence rebounded slightly in June after reaching a near-historical low in May, which may be a positive indicator for the second half of the year.

New Jersey’s unemployment rate has remained higher than the national average for more than two years, moving between 4.5%-4.8% for much of last 24 months. According to the New Jersey Department of Labor, most gains in employment during the last year have been in private education and health services, government, financial services and manufacturing. Other bright spots included growth in high-value sectors such as life sciences and technology. While there have been positive gains in the government sector over the last year, federal layoffs could have a potential impact in the latter half of 2025.

Market Overview

The issues affecting the national economy during the first half of the year, also influenced trends in the New Jersey industrial market. The shifting policy on tariffs have made decision making difficult for both businesses and consumers—casting uncertainty on leasing activity for the second half of the year. Although transaction velocity was on par with last year, the time to complete deals has lengthened. Demand from logistics and distribution firms and 3PL companies, however, has helped to temper a spike in vacancy. The construction pipeline beyond 2025 shows a dramatic drop in the number of planned deliveries. Over the longer term the reduction in the amount of square footage from speculative construction coupled with any increase in activity could reverse the rising trend in vacancy. Vacancy rates continue to rise in most submarkets. After reaching a historical low of 2.0% in 2022, the overall rate has slowly but consistently risen, reaching 5.9% at mid-year. In response to the rising vacancy rate, average asking rents have stalled and have even softened a bit in some submarkets. Asking rates remain the highest for submarkets in and around Bergen County.