Industrial product has been the silver lining for the commercial real estate industry during the COVID-19 pandemic. As the pandemic paused, the industrial market in New Jersey continued its steady momentum of new deals and development projects, outpacing other asset classes during the current environment. Industrial demand has been boosted by substantial e-commerce transactions, creating even more of a shortage for big-box warehouses. Stay-at-home orders have accelerated the shift toward e-commerce purchases, a trend that will likely stick and be a permanent part of consumer buying habits. This will eventually increase demand for distribution space, particularly cold storage if online grocery shopping persists. Additionally, with retailers struggling to remain afloat during the current environment, repositioning of larger retail sites may provide some relief, but comes with its own set of obstacles to overcome.
While the growth of e-commerce has driven demand in the Garden State, headwinds remain, particularly for smaller logistics companies that service industries negatively affected by the pandemic such as leisure, hospitality, and restaurants. New Jersey’s industrial market has already seen a significant uptick in new sublease availabilities during 3Q 2020 from such firms, and we anticipate this trend to continue as pandemic related closures persist.