CARA announces 2024 sees a huge surge in deliveries of brand-new constructed properties
The industrial real estate sector in NJ faces a significant challenge.
Many new industrial spaces are slated for completion in 2024, just as tenant preferences shift because of concerns about a slowing economy that potentially complicates the market landscape.
Currently, 19.2 million s/f (about half the area of Central Park in NYC) of industrial space are under construction in New Jersey, equivalent to roughly half the size of Central Park in NYC. 34 “New Class A Type Buildings” are now under construction or are planned to be delivered in 2024.
These “Brand New Class A Type” single-story Industrial properties are at least 200,000 to approximately 1,200,000 s/f.
This influx of new space, particularly concentrated in Northern New Jersey, is expected to impact market dynamics negatively. Predictions suggest that the average vacancy rate for industrial spaces could increase to 5.1% in 2024.
This would be a notable rise and the first of its kind since 2012.
Middlesex County is at the forefront of this new construction wave, with 4.7 million s/f underway, akin to nearly half the total floor space of the Pentagon.
Alarmingly, 90% of this upcoming space has not yet been leased. This added “Brand New” Industrial Real Estate that is now destined for the NJ Market(s) creates tremendous opportunities for tenants and purchasers as the formerly “tight markets” start loosening up the developer’s/landlord’s firm grip on pricing any available space.
However, the State of NJ’s industrial real estate developers still have a growing preference for developing larger, mega-sized properties (over 200,000 s/f) — equivalent to about twice the size of a Manhattan city block. These properties, which represent 67% of ongoing construction, have a low pre-lease rate of just 8%. Unless deal velocities pick up, this situation could lead to increased leasing concessions by developers as more “shell buildings” enter the market.
Tenant preferences are also evolving, with a noticeable trend towards midsized buildings, ranging from 50,000 to 150,000 s/f (about half the area of the Lincoln Memorial Reflecting Pool) — comparable in size to an NFL football field. This shift is challenging the leasing landscape for larger spaces, potentially leading to long-term vacancies or necessitating a reevaluation of use for these larger, from developers hoping to hit the “homerun” with a single-tenant rather than having more capital-extensive multi-tenanted or possibly repurposed developments. Such changes underscore NJ's industrial real estate market's dynamic nature and signal a critical adjustment period for developers and property owners until more positive signs of increased demands for space akin to 2020- through the heights of demand for space that went into the 1st quarter of 2023.
In the face of NJ's industrial real estate evolution, the emergence of new class A spaces presents an unparalleled opportunity for tenants and buyers to capitalize on more favorable market conditions.
Our database provides detailed information and specifications for each property in NJ's expansive industrial real estate market, encompassing over 900 million s/f.