Industrial Submarket Report: Exit 10

The Exit 10/Route 440 industrial submarket, predominantly located in Edison Township, also extends into Keasby, Metuchen, Perth Amboy, and Woodbridge, New Jersey.? This strategic area is home to major tenants like Amazon, Home Depot, Iron Mountain, FedEx, Target, Dotcom Distribution, and List Logistics, making it a critical hub for distribution and logistics operations. The submarket's prime location, situated just 20 miles from the Port of Newark/Elizabeth via the New Jersey Turnpike, 30 miles from Midtown Manhattan, and 68 miles from Philadelphia, offers excellent connectivity.

A significant feature of this submarket is Raritan Center, encompassing 11 million square feet of industrial space, it has become a well-known micro-market within Exit 10/Route 440. Raritan Center is the largest industrial park east of the Mississippi River. Originally part of a former Army arsenal, the area was transformed into an industrial and office zone in 1968 by Frank and Vincent Visceglia, who acquired the land and redeveloped it into a thriving business center. Today, Raritan Center benefits from its proximity to major highways such as the Garden State Parkway, NJ Turnpike, Route 287, and Route 440, making it a key destination for industrial tenants seeking prime space with robust infrastructure and access to a strong labor pool.

Trends/Forecasts

Currently, there are no industrial buildings under construction at Exit 10/Route 440, reflecting the broader trend of slowed construction starts across New Jersey. Over the past five years, however, this submarket has seen the delivery of 4.6 million square feet of new industrial space across 13 buildings, with sizes ranging from 50,000 to 900,000 square feet and clear ceiling heights averaging 36 feet.? One of the most significant recent developments in the area is BridgePort II, delivered in Q2 of 2024 by Bridge Industrial, a privately-owned developer. Located in Perth Amboy, this 1+ million-square-foot logistics park represents the largest block of space brought to the market since 2020. The development, situated on a 73-acre site, consists of two state-of-the-art logistics facilities: Building A, totaling 243,600 square feet, and Building B, with 800,000 square feet.? Building A features 36-foot clear ceiling heights, 48 dock spaces, 121 trailer storage spaces, and 8,184 square feet of dedicated office space. Building B offers 40-foot clear ceiling heights, 168 dock spaces, 181 trailer storage spaces, and 24,120 square feet of office space. Strategically positioned off I-95’s Exit 10, BridgePort II provides easy access to the New Jersey Turnpike while minimizing the impact on local roads and the community.? As one of the few large-scale distribution facilities in the Perth Amboy region, BridgePort II is well-positioned to meet the demands of large e-commerce companies.? The project also contributes significantly to the local economy, generating $2.9 million annually in gross taxes for the City of Perth Amboy through the PILOT Program; the PILOT (Payment In Lieu Of Taxes) program is a financial agreement where property owners make payments to the local government instead of traditional property taxes, often at a negotiated rate, to incentivize development and investment in specific areas.

Asking rents at Exit 10/Route 440 have shown a consistent upward trend over the past several years, reflecting the broader market dynamics across New Jersey. In 2017, the average asking rent for this submarket was $8.05 per square foot, with Class A spaces slightly higher at $8.50 per square foot. By 2020, these rates had climbed to $9.04 and $11.21 per square foot, respectively, signaling increasing demand for quality industrial space.? The most significant jump occurred between 2020 and 2022, where total market rents rose from $9.04 to $14.62 per square foot, and Class A rents surged from $11.21 to $19.00 per square foot. This rapid escalation can be attributed to heightened demand, driven by the growth of e-commerce and the need for logistics facilities near major transportation hubs.? In 2023, the total market area average asking rent reached $17.45 per square foot, while Class A rents slightly decreased to $18.31 per square foot, indicating market stabilization after a period of rapid growth. Looking ahead to 2024, rents are projected to moderate slightly, with total market rents forecasted at $16.73 per square foot and Class A rents at $17.50 per square foot.? This trend reflects what is seen across New Jersey, where demand remains strong but is facing pressure from increased vacancy rates and a more cautious investment environment.

The Exit 10/Route 440 industrial submarket has experienced moderate investment activity over the past year. In the last 12 months, the market saw a total sales volume of $14.5 million across two transactions, with properties trading at an average price of $245.76 per square foot. This reflects a cautious but steady interest from investors, particularly in high-quality assets. The market cap rate stands at 5.8%, slightly above the three-year trailing average of 5.3%, indicating stable investment conditions despite current economic uncertainties.? Recent notable transactions include the sale of 6 Olsen Ave, a 29,000-square-foot property in Edison, for $8 million at $276 per square foot, and 54 Kellogg Ct, a 30,000-square-foot property, for $6.5 million at $217 per square foot. Both sales highlight continued demand for strategically located industrial assets within the submarket.? Over the past three years, the submarket has seen 17 sales totaling approximately $166 million, underscoring its importance within the region’s industrial landscape. As the market continues to evolve, investors remain focused on properties that offer stable, in-place cash flows and strategic locations near key transportation hubs.

Tenant’s Perspective

For tenants at the Exit 10/Route 440 industrial submarket, current market conditions present both opportunities and challenges. The submarket's prime location, ideally positioned close to major ports and urban centers, continues to make it an attractive option for logistics and distribution operations. Major companies like Amazon, Home Depot, and Target have already established a significant presence here, leveraging the excellent connectivity and infrastructure to optimize their supply chains.

The recent upward trend in asking rents, reaching $17.45 per square foot in 2023, reflects the growing demand for industrial space in this area. However, the slight decrease in Class A rents to $18.31 per square foot suggests a stabilization of the market, offering tenants a window to negotiate more favorable lease terms. Despite the lack of new construction currently, the ongoing development of projects like BridgePort II indicates that the submarket will continue to evolve, providing modern, high-quality spaces that cater to the needs of large-scale e-commerce and retail operations.? Tenants should be aware of the relatively low vacancy rates and the strong investment interest in this submarket, which could drive competition for available space. Nonetheless, the strategic advantages of this location make it a compelling choice for businesses looking to enhance their distribution capabilities.