The turmoil of the past year and a half have made big changes in New Jersey’s commercial real estate market. With more people working from home, the markets for retail and office space have gone quiet. Many employers have adjusted and may never go back to fully staffing office space the way they once did.
At the same time, another segment of the commercial real estate market is buzzing like never before. According to some market analysts, vacancy rates for warehouse space are near historic lows. The real estate company CBRE reported that the industrial and logistics market gobbled up almost 100 million square feet of space in just the first quarter of this year, the third highest amount on record. Another 376 million square feet are under construction.
The biggest factor pushing this growth in warehousing is e-commerce. Online retail behemoth Amazon has famously pushed its workers to speed up shipping, and its customers like the convenience. Other companies have had to speed up their own shipping to compete.
Much of the recent surge in warehouse space is related to trends that have been going on for years, but the past year has accelerated things.
Increased demand and reduced supply leads almost inevitably to increases in prices. This May, the average rent for warehouse space in northern New Jersey was 33% higher than it was in May 2020. Landlords have seen bidding wars between potential tenants seeking to increase their warehouse spaces.
When any segment of the real estate market gets hot, there is a lot of potential. There is potential for profit, but also potential for things to go wrong. Developers, property owners, investors and others interested in the warehouse market can benefit from speaking to an experienced real estate attorney about ways to protect their investments and improve their businesses.