New Jersey industrial deliveries drop 58% as scarcity tightens market

New Jersey industrial deliveries drop 58% as scarcity tightens the market

New Jersey is shifting toward a landlord’s market. According to a report from Newmark, industrial deliveries in the state plummeted 58% year-over-year in the third quarter. This drop in new supply, paired with a stream of e-commerce demand, is creating a squeeze in the region.

The implications for the regional economy are substantial.

Tenant demand outpaces new construction

Net absorption in the northern and central New Jersey submarkets hit 3.2M SF in the third quarter, according to Newmark’s report.

The gap between what tenants need and what is being built is widening. Brian Danahy, Stonemont Financial Group Vice President, Development and Acquisitions, noted that tenant space requirements total around 80M SF.

This scarcity is particularly acute for large-scale users. Ryan Nelson, a managing principal at Turnbridge Equities, added that there are just five buildings under construction that are poised to deliver in the next year, which will likely contribute to an even tighter market than this year — including for big-block space.

Regulatory hurdles and zoning risks stall development

While high interest rates play a role, the inability to bring new buildings online is increasingly tied to the complexity of the local approval process. Developers are facing a landscape where municipal resistance and changing local laws create significant uncertainty.

Mikki Columbus, Prologis Vice President of Leasing and Development, highlighted the difficulty of current approvals.

However, this difficulty creates a different kind of value for those who do succeed. Stefan Sansone, Kurv Industrial Senior Vice President of Investments, argued that when a site does manage to get approved, it is irreplaceable in many of these municipalities.

Interest rates and the struggle for rent growth

The financial side of the equation remains volatile. While the scarcity of space favors landlords, the cost of debt remains a major headwind. Ryan Nelson noted that high interest rates have made everything more expensive and harder to buy, adding a layer of complexity to the investment landscape.

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There is also a tension between landlords and their lenders regarding how to manage vacancies. While some equity partners might encourage landlords to push for the highest possible rents, others prioritize immediate occupancy to maintain cash flow.

Anthony Rinaldi, a Saxum Real Estate Managing Principal, explained that the recent volatility in the 10-year Treasury has complicated many players’ plans. He noted that for some, the priority is simply avoiding the downtime that can destroy an internal rate of return.

This cautious approach by landlords may result in a paradox: a market with high demand and low supply, yet one where rent growth remains muted. Helen Paul, an executive director at Cushman & Wakefield, suggested that while an inventory crunch is approaching, rent growth is likely to be lagging.