LEO A. ESSES & ILAN TABBOUCHE
RISING INTEREST RATES, HIGH INFLATION, FEAR OF RECESSION—IS THE SIZZLING INDUSTRIAL MARKET WEAKENING? OVER THE PAST 12 MONTHS, THE TOTAL OVERALL SALES VOLUME IN THE NORTHERN/CENTRAL NEW JERSEY INDUSTRIAL MARKET EXCEEDED $2.1 BILLION, WITH THE AVERAGE ASKING PRICE AT APPROXIMATELY $180 TO $250 PER-SQUARE-FOOT.
This is way above historical highs for the New Jersey marketplace. As of the second quarter, the market’s overall average asking rent rose to approximately $12.00 to $14 per-square-foot, an increase of $2.00 per-square-foot over the same quarter last year.
As the largest independent industrial real estate services firm in New Jersey, Bussel Realty Corp has never seen rents higher since it was established over 45 years ago! Consequently, the availability/vacancy rate ticked downward from just over 2% in the second quarter 2021, to sub-2%, despite millions of square feet of new construction coming online during the year.
So why hasn’t the Industrial real estate market felt the impact?
Because tenant demand continues to outpace available supply, in spite of more than 16 million square feet of new developments under construction or in the pipeline in Northern/Central New Jersey! Without a doubt, higher Fed interest rate increases coupled with inflation will continue to disrupt the economy, and eventually effect the industrial real estate market.
The current prime rate of 5.5% increased from 3.5% in the past 6 months. It was steady at 3.25% throughout 2021. The current CPI (consumer price index) at 8.3, increased 8.5% from 12/31/21, and increased 7.9% in 2021. S&P 500 YTD (year to date) is 17.25% DOW – 9.61%.
However, job growth is still brisk and consumers are still ordering goods online. So, how e-commerce goes, to a good extent, so does the industrial market go. Based on our work with clients, we believe the market will remain strong in the short-term, but lease and sale rates will not continue to rise at the incredible pace they have risen in past 2½ years since the onset of Covid.
What does this mean if you own industrial real estate?
If you ever thought of selling, this could be the best time, as we see many cash buyers interested in purchasing and many are still prepared to pay the high price of industrial real estate. However, we feel the window of opportunity, with its exceedingly high profits, is starting to close; therefore, many of our savvy clients are taking advantage of the market’s still current strong pricing and utilizing our knowledge, experience, and exclusive marketing services to maximize the sale of their property.
If you call us, our marketing team can provide you with a free comprehensive market analysis to determine the current value of your property, as well as an estimate of what we feel the property’s value would be in the next 12-24 months.
Leo A. Esses’ & Ilan Tabbouche’s expertise consists of tenant and landlord representation services in the sale, leasing, and ground-up development of industrial real estate.
