Future Cities
2020 North America Industrial Big Box Review & Outlook
New Jersey
Northern/Central New Jersey has the busiest seaport on the East Coast. With one of the lowest vacancy rates in the country and dwindling land availability, the region’s big-box activity lags that of other major North American markets. Demand is driven by both e-commerce and traditional retail occupiers seeking to place product close to the vast Northeast consumer base. As a result, rents continue to reach new record levels as supply struggles to meet demand.
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Demographics
The Northern/Central New Jersey market serves the largest population base in the U.S. The region leads North America in the 50-, 100- and 250-mile radius areas. Population within 50 miles of the market core is expected to grow by 1.7% over the next five years to 17.7 million people. The region leads North America in total households within a 50-mile radius of the market core (6.6 million).
Figure 1: Northern/Central New Jersey Population Analysis
Source: CBRE Location Intelligence.
According to CBRE Labor Analytics, the region has 265,124 warehouse workers—the most in North America. This workforce is expected to grow by 8% over the next 10 years. Because of robust demand for labor, the average wage for a non-supervisory warehouse worker is $15.55 per hour—10% higher than the national average.
Figure 2: Northern/Central New Jersey Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics.
Location Incentives
According to CBRE’s Location Incentives Group, the state of New Jersey recently enacted new legislation under the Economic Recovery Act of 2020 that replaces the Grow NJ program. This new program provides state corporate income tax credits for new and retained jobs for up to seven years under the following conditions:
- Tax credits can be used, sold or transferred for not less than 85% of value. Instead of selling to a third party, a business may sell the credits for 90% of value to the N.J. Treasury.
- Among additional program requirements, target industries must create at least 25 net new full-time jobs, and non-targeted industries must create at least 35 net new full-time jobs. Projects that are in certain qualified areas must retain 500+ full-time jobs, and projects in non-qualified areas must retain 1,000+ full-time jobs.
Additionally, New Jersey local governments may have other funding tools for more specialized needs in the form of tax abatement and tax increment financing for selected projects.
Figure 3: Northern/Central New Jersey Top Incentive Programs
Source: CBRE Location Incentives Group.
Note: The extent, if any, of state and local offerings depends on location and scope of the operation.
Logistics Driver
The Port Authority of New York and New Jersey is the busiest seaport on the East Coast and the third most active in the U.S., with the infrastructure to move cargo by air, land, rail and sea. It has direct access to more than 28 million consumers.
Five airports have direct cargo lines to the port: John F. Kennedy, Newark Liberty, LaGuardia, New York Stewart and Teterboro. Numerous bridges and tunnels near the port provide access to the tri-state area and beyond.
As one of the premier logistics gateway markets in the world, Northern/Central New Jersey is highly attractive to investors. Class A and B cap rates continue to compress due to limited supply, driving rental rate growth and investor confidence for long-term appreciation. Available land is limited and is at record pricing. With increasing rental rates and corresponding land values, the pricing and return metrics for redevelopment of existing office and retail properties into industrial facilities is a compelling option for investors. As new investors to the logistics business continue to pursue assets and the market fundamentals remain favorable in Northern and Central New Jersey, demand and pricing are expected to increase in 2021.
Capital Markets
Figure 4: Cap Rate Comparison
Source: CBRE Research.
Supply & Demand
With 396 million sq. ft. of total inventory, the Northern/Central New Jersey industrial market is the third largest in North America. The market’s proximity to the largest population concentration in the U.S. has attracted occupiers for years and 2020 was no exception with nearly 14 million sq. ft of transactions and 3.2 million sq. ft. of net absorption. The market posted a U.S.-low 1.3% direct vacancy rate despite another year of robust development.
Traditional retailers and wholesalers were most active in 2020, accounting for 41.3% of all deals. Continued robust demand increased the first-year taking rent to $8.46 per sq. ft. in 2020, 6.3% higher than in 2019—the second highest rate in the U.S. behind Los Angeles County. As demand for new product remains strong, development will continue to take place farther south along the New Jersey Turnpike. This demand will keep vacancy rates low and rental rates high for the foreseeable future.
Figure 5: 2020 Occupier Transaction Market Share
Note: Includes transactions signed in 2020.
Source: CBRE Research.
Figure 6: Transaction Volume
Note: Includes new leases, renewals, and user sales transactions 200,000 sq. ft. and above.
Source: CBRE Research.
Figure 7: Big Box Year-Over-Year Comparison
Source: CBRE Research.
Figure 8: Under Construction vs. Preleased
Source: CBRE Research.
Figure 9: First Year Taking Rents (psf/yr)
Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research.
Contacts
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2020 North America Industrial Big Box
This report provides an in-depth overview of supply-and-demand fundamentals, demographics, logistics drivers, labor and location incentives for the top 22 markets in North America.