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Avison Young New Jersey Fourth Quarter 2020 Industrial Market ReportFebruary 21, 2021
Morristown, NJ – Industrial sector vacancy rates appear to have bottomed out at 2.7%, while rents continue to rise, according to the Avison Young New Jersey Q4 2020 industrial sector report.
“The 2.7 percent vacancy rate at the close of the fourth quarter this year is just slightly higher than the 2.6 percent it was during the fourth quarter of 2019,” says Jeff Heller, Avison Young. “The historic ascent of NNN rents has continued to $9.14 per square foot while the market has experienced its seventh straight quarter of positive absorption.”
Major industrial sector deals in New Jersey during the fourth quarter of 2020 include:
As part of a 13-property sale-leaseback transaction, Iron Mountain leased 220,328 square feet at 22 Kimberly Road in East Brunswick.
National Tree Products agreed to lease 608,422 square feet at 150 Milford Road in East Windsor. The seller of artificial Christmas trees will occupy the recently updated warehouse.
JFR Global Investments purchased 100 Jefferson Road in Parsippany after a multimillion-dollar renovation.
Prism Capital Partners sold 111 Ideation Way in Nutley to Harrison Street Capital for $36.75 million. This flex/R&D property is part of the former Hoffmann LA Roche HQ campus and the reimagined ON3 project.
Issue Spotlight: Cannabis Lessons learned from around the country
The Avison Young report spotlights the issue of cannabis and its impact on commercial real estate. in November, the voters of New Jersey amended the state constitution to allow for the legal adult use of cannabis starting January 1, 2021. This amendment put the state legislature and Governor on the clock to formalize the legal cannabis marketplace regulations.
With the legal cannabis business coming to the Garden State, Avison Young decided to look to other states that have legalized the recreational use and growth of cannabis to try to understand the real estate impact.
Jason Bloom, Avison Young Research Manager for the New Jersey market, says, “As the New Jersey real estate community prepares for the cannabis industry to enter the market, it is essential to learn about the challenges and successes experienced in other states across the country.”
Avison Young noted that based on other states, the legalization of cannabis would almost exclusively directly affect the industrial and flex markets. After speaking to professionals around the country, the main effect it had on the office market was the repurposing of class C-buildings to be used by cultivators. The location of the growing faculty is often dictated by the state regulations. Many states require a certain distance from schools and other places frequented by children.
Another trend that we observed in other states was that growers decided to occupy properties away from the traditional industrial properties. If they chose to rent, they typically paid a 25 percent premium over the asking rent and are the lone tenant in the building.
While recreational use and growth of cannabis have become legal in a handful of states, it is still illegal under federal law which creates challenges for users and landlords. Due to the continued federal illegality, many banks and lending institutions refuse to lend to landlords with cannabis companies as tenants. This has limited the building options for companies involved in the growing and selling of cannabis to owners that own their buildings outright.
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