Industrial Markets During Covid 19

Over the past 10 years e-commerce has taken an ever-growing share of the retail market.  The trend accelerated during the pandemic, as depicted by the US Census Bureau in the chart below:

At the beginning of the pandemic economic activity across many real estate classes initially slowed to a crawl.  As e-commerce quickly increased by necessity due to pandemic restrictions, brick and mortar retail took a hit while demand for industrial space, especially for facilities related to e-commerce, accelerated.

The NJ industrial market is now out of balance, with demand outstripping supply.  The results are record low industrial vacancy rates (1.7%) and rapidly appreciating rental rates (25% year over year increase to Q3, 2021).  Some areas, such as northern NJ, have seen rental appreciation exceeding 40% year over year.  Leasing volume is up 20% over the same period a year prior.  Much of the absorption is focused where product is available, in the Port areas, where new construction has been occurring to meet demand.  Burlington County has also seen absorption activity related to new construction.

The main driver of the industrial market is users seeking additional space to handle e-commerce consumer demand.  E-commerce is projected to continue to grow, with the accelerated level seen during the pandemic becoming a permanent fixture.  Additional demand has come from the need to move storage home, in light of the growing realization that just in time inventory systems were more vulnerable to supply chain disruptions than expected.  Projections for 2022 are for continued upward trending industrial market conditions, albeit, at a moderating rate.

Comprehensive Appraisal Corp. takes time to understand the dynamics of ever evolving markets.  Our 30 years of experience and knowledge can be counted on to help valuation users navigate through the current unusual times.