Industrial Submarket Report: Western Rural New Jersey

The Western Rural New Jersey industrial submarket, strategically located along the Route 78, 287, and 206 highway corridors, plays a pivotal role in the region’s logistics and manufacturing landscape. Spread across the townships of Branchburg, Bridgewater, Flemington, and Hillsborough, this submarket covers an expansive 22.6 million square feet across 155 buildings, catering to a diverse range of industries.

Among the notable tenants, NFI Industries, a leading player in logistics, operates extensively within this corridor, leveraging the excellent connectivity to major markets. Lienmart and USA Container Company, both key players in the packaging and container sectors, utilize the strategic location to manage distribution effectively across the northeastern United States. Danker, a specialized manufacturer, benefits from the area’s robust infrastructure to maintain its supply chain operations. Additionally, Amneal Pharmaceuticals represents the pharmaceutical sector, utilizing the submarket’s strategic position to streamline operations and distribution.

The geographical positioning of the Western Rural New Jersey submarket is particularly advantageous—just 37 miles from the Port of Newark/Elizabeth, 57 miles to downtown Philadelphia, and 47 miles to New York City. This proximity allows tenants easy access to three of the country's major urban centers, making it an attractive hub for businesses that require efficient transportation links for high-volume distribution. The submarket’s location, coupled with its broad industrial base, positions it as a crucial node in the Northeast’s supply chain network, ideal for companies seeking logistical advantages and access to extensive consumer markets.

Trends/Forecasts

While historically the Western Rural New Jersey industrial submarket has experienced fewer new construction deliveries compared to markets nearer to the ports, recent developments indicate a shift towards increased construction activity. In 2023, this submarket saw the completion of 365,000 square feet across two buildings, and plans are underway to deliver an additional 400,000 square feet in 2024. Furthermore, there are proposals for an ambitious expansion that includes 1.2 million square feet across 10 buildings to be rolled out over the next few years.? A notable development in 2023 was at 3091 US Highway 22 in Branchburg, NJ, where a 311,000 square foot Class A industrial warehouse was completed. This facility stands as the second-largest warehouse ever delivered in this submarket. Occupying a site that was formerly a golf range, this property spans 25 acres and is equipped with modern amenities such as 42 tailgate level dock doors, 40-foot ceilings, parking for 29 trailers, and a solar-ready roof. Strategically located, it offers toll-free access to Port Newark and Elizabeth, enhancing its logistical efficiency.? Transwestern, the original owner and developer, successfully obtained a use variance from the local zoning board in 2022, allowing construction to proceed. They developed the building as a build-to-suit project for Abaline Supply Company, a medical supply firm that has recently purchased the facility from Transwestern, and plans to relocate its headquarters here from Bayonne, NJ.

The asking rent trends in Western Rural New Jersey have shown notable fluctuations and an overall upward trajectory from 2017 to the projected rates for 2024, though they consistently remain below the broader New Jersey market average. Starting in 2017, asking rents in Western Rural New Jersey were at $7.56 per square foot, slightly above the state average of $7.20. However, in 2018, the region saw a decrease to $6.95, contrasting with an increase across New Jersey to $8.08, indicating a potential temporary market softness or adjustment within this submarket.

From 2019 onwards, rents in Western Rural New Jersey began an upward climb from $7.88 to peak at $12.13 in 2022, suggesting strengthened demand and reduced supply in the area. This peak was followed by a slight decrease to $12.03 in 2023 and further to $11.71 in 2024, with a projection of $11.61 by the end of 2024. This slight decline reflects the softening market conditions, which is mirrored across the state of New Jersey.? Comparatively, rents across New Jersey have shown a more consistent and steeper upward trend, rising from $7.20 in 2017 to a high of $15.74 in 2024 before a minor projected decrease to $15.51. The consistently higher rents across the state compared to Western Rural New Jersey highlight the possibly greater demand or fewer availability constraints in other parts of New Jersey.??

The vacancy rates in Western Rural New Jersey from 2017 to the projected rates for 2024 demonstrate fluctuating yet generally upward-trending market dynamics. Starting in 2017 with a modest rate of 2.6%, the vacancy rates rose to 3.5% in 2018, indicating an increase in available industrial space or a slight dip in occupancy rates.? In 2019, the rate dipped to 2.1%, suggesting an improvement in occupancy, due to increased demand and the lack of construction deliveries at that time. However, the year 2020 saw a significant spike in vacancy rates to 5.1%, influenced by market disruptions related to economic conditions, which include factors such as the COVID-19 pandemic impacting business operations and demand for space.? The rate sharply corrected to 2.0% in 2021, indicating a robust recovery and possibly aggressive leasing or absorption of existing industrial spaces. The rates saw another rise in 2022 to 4.9% before moderating to 2.9% in 2023, and a slight increase to 3.8% in 2024, with projections for a further increase to 4.1% by the end of the year. This ongoing fluctuation suggests a responsive market that adjusts quickly to economic shifts and changes in supply and demand dynamics.? The projected increase in vacancy rates for 2024 indicates the anticipation of new construction completions, along with a more cautious approach by tenants in response to broader economic conditions.

In recent years, the Western Rural Industrial Submarket has shown moderate investment activity, recording a total sales volume of $480 million from 2019 to 2022, with an average of $84 million trading annually. However, 2023 marked a downturn, with the total transaction value plummeting to $23 million, a 58% decrease from the previous year and the lowest since 2018’s $8 million. This decline in activity was milder compared to other areas in the Northern New Jersey metro area. Despite fewer transactions, sale prices in the submarket surged by 74% since 2019, reaching an average of $174 per square foot. This price increase signals a significant shift in market conditions. Looking forward, rent growth is expected to continue moderating into early 2025, likely keeping institutional investors cautious. This ongoing adjustment suggests a recalibration of investor strategies in response to evolving economic factors within the industrial real estate market.

The Tenant’s Perspective

From the Tenant’s Perspective, the Western Rural New Jersey industrial submarket, the region presents a compelling mix of accessibility, strategic location, and economic viability. Nestled along key transportation corridors such as Routes 78, 287, and 206, this submarket serves as a critical hub in the Northeast’s supply chain network, offering businesses robust logistic capabilities.?

Companies like NFI Industries and Amneal Pharmaceuticals have capitalized on the submarket's strategic location close to major urban centers—37 miles from the Port of Newark/Elizabeth, 57 miles to Philadelphia, and 47 miles to New York City. This proximity allows for efficient distribution and operations management, reaching extensive consumer markets effectively.?

Recent developments in construction reflect a vibrant expansion phase, with over 1.6 million square feet added or proposed since 2023. These include the notable 311,000 square foot Class A facility at 3091 US Highway 22, enhancing the submarket’s capacity for high-end logistics operations. Despite the broader market experiencing a slowdown, the localized resilience in Western Rural New Jersey offers tenants stability and continued growth opportunities.?

Furthermore, the submarket's competitive asking rents, which have shown a general upward trend but remain below the state average, underscore its appeal as an affordable option for businesses. The slight fluctuations in vacancy rates, projected to increase modestly, suggest a balanced market adjusting to new deliveries and economic conditions.

For tenants, Western Rural New Jersey stands out as an economically sensible choice, blending strategic geographical advantages with favorable market conditions. This blend not only supports current operational needs but also provides flexibility and potential for future expansion, aligning with businesses aiming for strategic growth in a dynamic industrial landscape.