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In the first quarter of 2022, JLL reported a vacancy rate of 1.0% for the New Jersey industrial sector—the lowest in the market’s history. But demand remains strong, especially in coastal markets. So with few vacancies, rents are trending higher.
The report from JLL Capital Markets’ industrial group, released June 23, identifies port markets as “the safe bet” for investors in the industrial space due to their rental growth—and the New Jersey and New York ports market as one of the top five nationwide.
Across the country, JLL found that port market asking rents in the first quarter of 2022 were up by 23% year over year compared with 16% growth for non-port markets. In the New Jersey and New York ports market industrial rents were up by 26% year over year.
Specifically in N.J., JLL previously reported an average total asking rent of $19.42 per-square-foot in the Ports submarket during the first quarter of 2022.
Top 5
Year-over-year rental growth in the U.S. ports market
- Miami – 53.3%
- Los Angeles – 45%
- Orange County – 27%
- New York/New Jersey – 26%
- Boston – 22.9%
Senior Managing Director John Huguenard, industrial co-leader in capital markets, attributed the uptick in asking rents to pent-up demand from both investors and occupiers from the pandemic, in addition to new buildings coming to market that “have boosted asking rents.” According to JLL, 22.1% of all new industrial inventory from Q1 was delivered in port markets. Earlier in the year, the firm reported that in New Jersey’s Port submarket, 4.3 million square feet were under construction during that period.
“The New York and New Jersey Port market has the lowest vacancy rates and one of the strongest year-over-year rent growth stories,” said JLL Capital Markets Managing Director Marc Duval in a statement. “It’s evident with consecutive record setting per-square-foot pricing in our last two port market transactions, 900 Fairmount in Elizabeth and 120 Frontage in Newark, investors are chasing port locations and growth fundamentals.
“Due to transportation costs rising and the flight to core locations becoming more of a focus, investor demand for port assets is at an all-time high,” he added.
Though rising interest rates could raise concerns, according to JLL, the effects on pricing and overall demand will not be the same everywhere. And these coastal markets offer opportunities for long-term growth in net operating income, “despite a near 40-basis point pricing premium.”
According to Senior Managing Director Trent Agnew, industrial co-leader for JLL Capital Markets, these assets are still a better long-game play for investors. “The lack of available land for development, as well as other barriers to new supply, is expected to drive property fundamentals well beyond 2022,” he said in a statement.
And the disruptions to the supply chain, or other issues arising from the COVID-19 pandemic? “[M]any ports are seeing their busiest years ever for containers,” said JLL Capital Markets Industrial Research Manager Nick Rita.
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