According to CBRE's latest Northeast U.S Logistics MarketView Snapshot, the Northeast industrial corridor, comprising New York City, North and Central New Jersey, Eastern Pennsylvania and Greater Boston, started 2021 with a bang.
Leasing continued to outpace supply, overall rents continued to climb, and demand was insatiable. The vacancy rate was a meager 3.9%, while the average asking rent climbed by $0.60 per sq. ft. from Q4 2020 to end the first quarter at $8.81 per sq. ft.
"Northern New Jersey alone posted leasing activity of 3.0 million sq. ft., an increase of 84% over Q4 2020," notes CBRE Vice Chairman Thomas Monahan. "Central New Jersey posted a new all-time high average asking rent for Class A industrial space, which climbed 8.8% and closed the first quarter at $10.42 per sq. ft., while Northern New Jersey broke the $15.00 per-sq. ft. mark for the first time."
The Greater Boston industrial market began the year where it left off at the end of 2020. The market experienced a remarkable Q1 2021 with 1.35 million sq. ft of positive net absorption.
"Boston's average asking rent rose by 3.4% to close the first quarter at $10.42 per sq. ft., while the vacancy rate was just 5.9%," according to Rachel Marks, CBRE's Industrial Practice Leader in the Greater Boston region. "While Hartford was the only market not to post positive absorption during the quarter, it managed to post the highest increase in average asking rents at 8.3% and ended Q1 2021 at $5.31 per sq. ft."
The Metro Philadelphia market also posted positive net absorption during the quarter. "Strong leasing demand across the Metro Philadelphia industrial market pushed overall asking rates 3.5% higher than the previous quarter. At the end of Q1 2021 Metro Philadelphia's average asking rent for Class A industrial space was $6.44 per sq. ft.," said Sean Bleiler, Senior Vice President at CBRE.
Notable transactions during Q1 2021 in the Northeast corridor included a 1.5 million sq. ft. lease by Georgia-Pacific at the PA I-78/I-81 Corridor, a 1.16 million sq. ft. commitment by Williams-Sonoma in Central New Jersey; and a 1.01 million sq. ft. lease by Mars Petcare along the PA I-78/I-81 Corridor.
Industrial construction is attempting to keep up with storing demand. During Q1 2021, 50% of current industrial construction underway was pre-leased in the Northeast corridor. Most of the region's construction activity is concentrated throughout the PA I-78/I-81 Corridor where available space is more abundant than other markets within the Northeast, with currently more than 14 million sq. ft. of space under construction.
On the investment sales front, e-commerce growth was the impetus for strong investor interest in industrial and logistics products. In addition, foreign investment experienced a significant increase during Q1 2021, rising by more than 20% from the previous quarter. In contrast, REIT investment sales dropped by 20% quarter-over-quarter.