market report - blauberg · market report 3rd quarter 2016 830 morris turnpike, 2nd floor, short...

Market Report 3rd Quarter 2016

830 Morris Turnpike, 2nd Floor, Short Hills, NJ 07078

The information contained herein has been obtained from sources considered to be reliable, but no guarantee of its accuracy is made by this company. In addition, no representation

is made respecting zoning condition of title, dimensions, or any matters of a legal or environmental nature. Such matters should be referred to legal counsel for determination.

Terms and conditions are subject to change without prior notice. Subject to errors and omissions.

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Established in 1932

Local Expertise | Global ReachMARKET TRENDS3Q16 | Northern & Central NJ

830 Morris Turnpike, 2nd Floor, Short Hills, New Jersey 07078 | Phone: 973-379-6644 | Fax: 973-379-1616 | www.blauberg.comThe information contained herein has been obtained from sources considered to be reliable, but no guarantee of its accuracy is made by this company. In addition, no representation is made respecting zoning, condition of title, dimensions, or any matters of a legal or environmental nature. Such matters should be referred to legal counsel for

determination. Subject to errors and omissions. The information contained in this document is proprietary to The Blau & Berg Company. Sources: CoStar, Internal Research, US Bureau of Economic Analysis

UNEMPLOYMENT

RATEJuly Aug Sept

NJ 5.2 4.9 5.1

U.S. 4.9 4.9 5.0

Leasing Rates

Sale Prices

Net Absorption

Vacancy Levels

Construction Activity

INDUSTRIAL MARKET TRENDS

-1.5625

0

1.5625

3.125

4.6875

6.25

Oct

2013

Jan

2014

Apr

2014

Jul

2014

Oct

2014

Jan

2015

Apr

2015

Jul

2015

Oct

2015

Jan

2016

Apr

2016

Jul

2016

US GDP GROWTH RATE

Economy

• Despite global economic, political and financial uncertainty, unemployment has remained buoyed

hovering around the 5% mark. Trade, Transportation, Utilities and Construction employment grew,

contributing to healthy consumer spending and confidence. The US Manufacturing sector

rebounded according to the Institute of Supply Management (51.5 PMI).

Retail

• Ecommerce growth due to online sales has at a price for retailers operating only bricks and mortar.

Online sales have increased over 16% year over year while total retail sales increased only 2.3% in

that same period. Several closings such as Walmart (150 locations), Sears (78 Kmarts/Sears)

and Macy’s (+/-100 locations) are feeling the pressure from online shopping. Changing consumer

habits have pushed retailers to downsize. There is little doubt that online shopping has enormous

potential however that does not translate to lack of a physical presence – it may just mean a demand

for smaller spaces. “‘Click and collect’ is vital to retailers’ online survival. It can protect margins

from the huge cost of online orders by eliminating the last mile to someone's door," said Michelle

Grant, Head of Retailing for Euromonitor International.

Office

• The New Jersey Office market absorbed an unexpected amount of SF this quarter. Strong demand

and higher rates continue in the Hudson Waterfront area. The Short Hills market also continues to

see additional absorption and a strategic option for companies looking for excellent facilities

offering amenities convenient to executive housing with good school systems in place.

• Close to eighty percent of the state’s office facilities were built in the 1980’s with amenities that are

either obsolete or inadequate to today’s tenant requirements. The revitalization of some of those

facilities (new HVAC, better parking ratio’s) and/or the demolition of some of those facilities will

help keep the vacancy rate down.

Industrial

• Demand has propelled to dizzying heights as quality space has dissipated, helping this market to be

one of the strongest we've seen in the past thirty years. Key indicators of this strong market have

been e-commerce and the food industry. The vacancy rate is 5.4%, as demand continues to outpace

supply aided by a disciplined speculative development approach despite having over 5.6MSF under

construction -half of which was under construction at the height of the last cycle in 2007.

• Amazon expanded its presence by 600,000 SF and is in talks to assume another 1MSF which would

make their total portfolio in NJ +/-7MSF. Exit 8A continues its strong demand as rents have

reached the mid $5 PSF NNN range and the area has a 3.8% vacancy.

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MARKET TRENDS3Q16 | Northern & Central NJ | Retail & Office

RETAIL MARKET TRENDS OFFICE MARKET TRENDS

VACANCY RATE

6.1%

ABSORPTION

-435,000 SF

AVERAGE ASKING RATES

General Retail $20.00 PSF

Mall $38.00 PSF

Power Center $20.75 PSF

Shopping Center $19.25 PSF

LEASE SIGNINGS

Floor & Décor 72,000 SF American Dream Meadowlands

Food Emporium 43,000 SF Plainsboro Plaza

Petco 15,200 SF Crossroads at Eatontown

VACANCY RATE

20%

ABSORPTION

850,000 SF

AVERAGE ASKING RATES

Class A $29.00 PSF

Class B $22.50 PSF

Class C $18.50 PSF

LEASE SIGNINGS

Ernst & Young 168,000 SF 121 River Street

Allergan 431,495 SF 5 Giralda Farms

iCIMS 350,000 SF Bell Works - Office


determination. Subject to errors and omissions. The information contained in this document is proprietary to The Blau & Berg Company. Sources: CoStar & Internal Research

Established in 1932

Local Expertise | Global Reach

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

2008 2010 2012 1Q2014 3Q2014 1Q2015 3Q2015 1Q2016 3Q2016

General Retail Mall Power Center

Shopping Center Specialty Center Total Retail

VACANCY RATES BY BUILDING TYPE

6.0%

7.0%

8.0%

9.0%

1Q2013 3Q2013 1Q2014 3Q2014 1Q2015 3Q2015 1Q2016

Northern New Jersey US

U.S. CAP RATE COMPARISON

Based on Office Building Sales of 15,000 SF and Larger




Established in 1932



determination. Subject to errors and omissions. The information contained in this document is proprietary to The Blau & Berg Company.

Industrial Space: ±810 MSF

Vacancy Rate: ±5.4 %

Net Absorption: ±4.3 MSF

Deliveries: ±1.1 MSF

Under Construction: ±5.6 MSF

MARKET OVERVIEW

$6.44 PSF

Average Lease Rate

$93.93 PSF

Average Sale Price

4.75 % - 6.3%

Average Cap Rate Range

5.1%

NJ Unemployment Rate

Recession

Recovery

Expansion

NJ

INDUSTRIAL CYCLE

Hyper Supply

OUTLOOK

Industrial rents continued to rise amidst record breaking

low vacancy rates along the NJ Turnpike, and into the

tertiary markets as demand from e-commerce, last mile

delivery services and food related companies continue to

absorb SF despite an increase in new speculative

development.

This demand for space should continue strong through the

4Q16 and well into the new year.

Expect cap rates for Class A distribution centers to

compress into the mid to low 4% range in the upcoming

quarters.

DASHBOARD

MARKET TRENDS3Q16 | Northern & Central NJ | Industrial



QUICK STATS3Q16 | Northern & Central NJ | Industrial



Established in 1932


Industrial MarketVacancy Rate

(%)

Average

Asking Lease

Rate (PSF)

Average Asking

Sale Price (PSF)

Net Absorption

(SF) ±

Bergen County 6.7 $7.76 $125.00 (79,817)

Passaic County 5.1 $7.23 $75.00 (4,067)

Essex County 4.1 $6.97 $78.00 158,462

Morris County 7.2 $6.62 $79.00 (60,400)

Hudson County 5.0 $7.13 $118.00 616,219

Union County 6.2 $6.35 $89.00 250,694

Middlesex County 3.4 $6.00 $94.00 2,561,663

Somerset County 5.4 $6.04 $72.00 (208,400)

Sub Market

West Essex 5.2 $7.21 $120.00 42,667

Meadowlands 5.9 $7.38 $130.00 399,667

Port/Airport 5.0 $6.50 $90.00 160,000

Exit 12 5.1 $6.45 $105.00 399,215

Exit 10 1.8 $5.87 $82.00 807,000

Exit 8A 3.8 $5.25 $85.00 929,667

Exit 7A 5.2 $4.46 $67.00 66,400

OVERALL 5.4% $6.44 $93.93 4,281,765

3.5

5.25

7

0.0%

2.5%

5.0%

7.5%

10.0%

2013 1Q2015 3Q2015 1Q2016 3Q2016

Lease Rates Vacancy Rates

HISTORICAL VACANCY & LEASE RATES

0 800000 1600000 2400000 3200000 4000000 4800000

2013

2014

1Q2015

2Q2015

3Q2015

4Q2015

1Q2016

2Q2016

3Q2016

HISTORICAL NET ABSORPTION




Established in 1932


BIG BOX MARKETSAVERAGE

RENTAL RATE (PSF)

Exit 16: Russo’s proposed

232KSF | 58 docks |19.47 AC

Exit 13: Duke’s Legacy Center

1.1MSF | 260 docks

Exit 12: Prologis’ Port Reading

2.75 MSF | 315 AC | 6 Bldg

Exit 10: ePort Logistics Center

1.3MSF | 56 AC | 3 Bldg

Exit 16

Exit 13a-15

Exit 13

Exit 10

Exit 12

Exit 6: Clarion Partners

1.57MSF

Exit 6

Exit 7A

Exit 8a

MARKET TRENDS3Q16 | Northern & Central NJ | Industrial | New Development Projects & Avg Rental


TOP INDUSTRIAL LEASES

Building Submarket SF Tenant

698 Route 46 Exit 16w 616,992 Amazon

203 Windsor Center Exit 8 567,000 Aurobindo Pharma USA

6001 Bordentown Sayreville 151,290 OEG Building Material

2 S Middlesex Avenue Exit 8A 128,700 SIF Services LLC

TOP INDUSTRIAL SALES

Address Submarket Price (±) Buyer

401 Cabot Drive Exit 3A $89 PSF | 600,600 SF RREEF

38 Porete Avenue Exit 15W $148 PSF | 139,255 SF GRM

51 Commerce Drive Exit 8A $71 PSF | 222,536 SF TIAA

9 Finderne Avenue Bridgewater $44 PSF | 316,000 SFBridgewater Ventures –

Hampton Meadows

TOP UNDER CONSTRUCTION PROJECTS

Submarket Type-Tenancy SF Completion (approx)

Exit 15E Spec-RTD 189,540 4Q16

Exit 13A Spec-Elberon 90,000 4Q16

Exit 13A Spec-Prologis 495,000 2Q17

Exit 13 Spec-Duke 495,000 3Q16

TOP OF THE CHARTS3Q16 | Northern & Central NJ | Industrial



Established in 1932



PORT INFO3Q16 | NJ/NY Import-Export

May

Year-To-Date

Import TEUs Export TEUs Total TEUsTotal Rail

LiftsLoads Empties Loads Empties Loads Empties Total

YTD Sep. 2016: 2,377,133 19,221 1,009,999 1,250,402 3,387,132 1,269,623 4,656,755 408,737

YTD Sep. 2015: 2,443,750 16,723 1,046,732 1,320,005 3,490,482 1,336,728 4,827,210 391,757

% Change -2.70% 14.90% -3.50% -5.30% -3.00% -5.00% -3.50% 4.30%

Sources: CoStar, Internal Research & www.panynj.gov


determination. Subject to errors and omissions. The information contained in this document is proprietary to The Blau & Berg Company.

Written by:

Jason M. Crimmins, CCIM, SIOR

President

[email protected]

Edited by:

Whitney A.W. Driver-Crimmins, MA

Marketing & Public Relations

[email protected]

“The Blau & Berg Company has been committed to its clients’ success since 1932; creating

corporate real estate solutions through integrity, market knowledge

and cutting-edge technology along with worldwide affiliates.”



market report - blauberg · market report 3rd quarter 2016 830 morris turnpike, 2nd floor, short...

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