Robust demand, strong leasing, and low vacancies all characterized logistics market
According to CBRE's latest Northeast U.S Logistics report, the Northeast industrial corridor, comprising New York City, North and Central New Jersey, Eastern Pennsylvania and Greater Boston, ended 2020 on a high note.
Net absorption was eight million sq. ft. higher than 2019, overall asking rents climbed $0.25 for the year and vacancies continued to drop dramatically.
Due to unprecedented online sales growth, e-commerce companies have been insatiable in their need for quality logistics space throughout the Northeast. As a result, the industrial market has experienced robust leasing activity and a lack of available space to accommodate the growing demand, a trend CBRE predicts will continue well into 2022.
One of the strongest industrial markets during Q4 2020 was Metro Philadelphia. "Strong leasing demand across the Metro Philadelphia industrial market pushed vacancy rates to all-time lows of 3.9% and overall asking rates to all-time highs. Regional market demand continues to break down historic submarket barriers across the entire I-95/I-78 corridors," said Sean Bleiler, senior vice president at CBRE.
Similar to Metro Philadelphia, New Jersey's vacancy rate for all classes of industrial space fell to a record low. "Northern New Jersey fell to 2.3% and Central New Jersey saw vacancies of just 1.6%," said Thomas Monahan, vice chairman of CBRE and one of the top industrial brokers in the U.S. "E-commerce and third-party logistics dominated the share of leasing activity, driven by continued Covid-19 stay-at-home protocols and holiday shopping. Wholesale and retail constituted a significant share as well, spurred by grocery sales and storage."
The Greater Boston and Greater Hartford industrial markets also experienced a remarkable fourth quarter with 1.34 million sq. ft and 204,454 sq. ft. of positive net absorption, respectively. "Boston and Hartford saw their industrial vacancy rates fall to 3.8% and 8% respectively, with very little new construction in the pipeline," according to Rachel Marks, CBRE's Industrial Practice Leader in the Greater Boston region.
Notable transactions during Q4 2020 in the Northeast corridor included a 1.9 million sq. ft. and a 1.8 million sq. ft. commitment by two major retailers in the PA I-78/I-81 Corridor, and a 1.2 million sq. ft. lease by an e-commerce company in the Philadelphia Metro area.
On the investment sales front, the Northeast region saw sales nearly double from the previous quarter, in large part due to eight portfolio sales totaling over eight billion dollars. Interestingly, the $120 million sale of 38 Porete Avenue in North Arlington, NJ was the highest price paid for a single property during Q4 2020. Other major transactions included the purchase of Cabot US Industrial's 27-property portfolio, totaling nearly eight million sq. ft.