Warehouse space continued to be very strong in the third quarter of 2019. Larger warehouse spacing from 100,000SF to 500,000SF is in high demand. As online sales/ordering increases each year and more distribution centers are needed to sustain these growing online sales/orders, the price of quality warehouse price continues to increase. Central New Jersey warehouse lease space is coming in at $5 to $9/SF NNN and $40 to $70/SF on the sale side.
Office space remained flat with vacancies of approximately 15 percent. The average office lease rates in central New Jersey are between $10 to $20 triple net, and $125 to $185/SF on the sale side.
Retail space continues to see some positive activity and vacancies seem to be declining to below 12 percent. Some retail space is being converted into other type of uses including warehouse distribution space, and medical office/urgent care uses. Retail lease pricing is slightly higher than office space coming in at $12 to $25/SF NNN, and $135 to $200/SF on the sale side.
Income producing multi-family units remains strong with many people downsizing and the demand for rental housing units is strong. The CAP rate on these income producing units remains around 8 to 12 percent. The Federal Reserve has lowered its short term fed funds borrowing rates in the third quarter of 2019 to 1.75 to 2 percent from 2.5 percent. This marks the second Federal Reserve rate cut of 2019. The Prime Interest rate was 5.25 percent in the third quarter, down from 5.5 percent in previous quarters.
Unemployment numbers continue to be at historic lows and even dropped to 3.2 percent in the Central New Jersey and Mercer County markets. The U.S. economy’s gross domestic product (GDP) grew by an annualized 3.2 percent in the first quarter, 2.1 percent in the second quarter, and may be slightly lower in the third quarter of 2019. The biggest leaders in the GDP numbers were personal consumption expenditures (PCE), private inventory investment, exports, state and local government spending, and nonresidential fixed investment. The average annual GDP growth has averaged 3.2 percent since 1947 in the United States.
All of the above economic indicators mentioned above suggest a growing and expanding economy, especially the historic low unemployment rates along with interest rates now tracking lower. We are confident that the fourth quarter of 2019 will continue the positive progress we made in the beginning of 2019 regarding the growing economy and vibrant commercial real estate market.
Joseph R. Ridolfi, Broker/ Owner, Joseph R. Ridolfi & Associates, LLC. www.ridolfi-associates.com.