With opportunities scarce, deal volume slows for New Jersey industrial sales

As published by Joshua Burd on Real Estate NJ

The struggle continues for investors looking to buy industrial properties in New Jersey, where prices remain high but sales volume remains low compared to other major markets.

A new report by Avison Young found that, through mid-February, industrial sales volume in northern New Jersey and New York City dropped year over year by 21.5 percent. By comparison, activity in Dallas and Chicago registered increases of 45.7 and 30.4 percent, respectively, the firm found, citing investment sales data from Real Capital Analytics.

The figures seemingly validate what New Jersey brokers and buyers have said in recent years: The ongoing surge in the market has meant a dearth of opportunities, as warehouse and distribution space has become a prized asset class among institutions and other major investors.

That has translated into soaring prices, which is also reflected in the Avison Young report. The research found that industrial sales in North Jersey and New York City averaged $118 per square foot in the fourth quarter, which was behind only Los Angeles’ average price of $133.

For the first month and a half of 2019, AY tracked 14 major industrial sales in and around North Jersey for a total of nearly 2.5 million square feet and $277.4 million. The sales had an average price per square foot of $115.

“The growth in e-commerce and corporate supply chain needs continues to fuel strong absorption and construction, which are positive barometers for the investment market,” said Erik Foster, an Avison Young principal and leader of the firm’s national industrial capital markets group. “We expect to see strong fundamentals and sales volume continue into 2019, with some markets constrained by a limited supply of assets and other factors.”

One of New Jersey’s recent deals showed just how much investors value top-flight industrial space. In December, LaSalle Investment Management and Greek Development sold a newly built, 452,000-square-foot warehouse at 1 Turner Place in Piscataway to Bentall Kennedy, commanding a price of $73.7 million or $163.13 per square foot.

The Avison Young report also noted that portfolio sales are driving many markets, although New Jersey has seemingly bucked that trend in recent months. Portfolio sales accounted for about 28 percent of industrial deals by dollar volume in New Jersey in 2018, according to the firm, whereas the market hasn’t seen any portfolio sales at all through the beginning of 2019.

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