Strong demand for modern warehouse space helped push asking rents for New Jersey’s industrial buildings up sharply in the third quarter, with big retail tenants willing to pay a premium for locations close to New York City, according to real estate services firm JLL.
Asking rents for industrial space in New Jersey rose to $7.09 a square foot in the third quarter, an 11.8% increase from the same period last year, JLL said.
The central New Jersey submarket reached $6.31 a square foot, a 14.5% bump from the previous year. Northern New Jersey’s asking rents climbed 10.5% to $7.69 a square foot, according to JLL’s report.
Vacancy rates dropped to historic lows, with New Jersey’s overall rate falling 0.6 percentage point to 4%. The central New Jersey submarket’s vacancy rate dropped to 3.4% in the third quarter.
About 6.5 million square feet of industrial space was under construction during the quarter. The amount under construction is relatively high for New Jersey, where land is limited, analysts said.
“There is more tenant demand than there is inventory coming online proposed or under construction,” said David Knee, JLL executive managing director. “So in the near term it means rents are going to continue to grow.”
Online retailers continued to drive demand. Wayfair Inc., an online home goods retailer, signed a lease to take 1.3 million square feet at a Cranbury, N.J., development, according to JLL.
Big bricks-and-mortar retailers expanding their online operations also are seeking space, said Mr. Knee.
In certain submarkets such as the Meadowlands, where there is lack of quality warehouse space despite proximity to New York City and the ports, the jump in rents was even sharper than the state’s overall increase. The average asking rent in the Meadowlands rose 16% to $8.95 a square foot.
Somerset County on the I-287 corridor has become a destination for tenants fleeing “skyrocketing asking rates” in locations along the New Jersey Turnpike, according to the report. But that increased demand has pushed the vacancy rate to 1.6% and driven up average asking rates to $6.74 a square foot, a 23% increase from last year.
Write to Keiko Morris at Keiko.Morris@wsj.com