Retailer Williams-Sonoma and package-delivery giant FedEx preleased 2.6 million square feet of distribution space in New Jersey in the first quarter, with the industrial sector continuing to soar in the Garden State in the new year.
New Jersey’s industrial market saw 15.7 million square feet of leasing in the first quarter, the highest level since the first quarter of 2016, when it topped out at 17.7 million square feet, John Obeid, senior director of research for real estate firm Colliers International, told CoStar News.
Williams-Sonoma and FedEx’s activities have been huge drivers of logistics so far this year, according to Obeid’s New Jersey market report, which was released Thursday. In what Obeid described as the “most notable transaction,” Williams-Sonoma agreed to lease 1.2 million square feet at 3 Sigle Lane in Dayton, New Jersey. That site is owned by Heller Industrial.
FedEx, in turn, preleased 873,743 square feet at 173-268 Doremus Ave. in Newark, followed by 513,240 square feet at 39 Edgeboro Road in East Brunswick, for a total of about 1.4 million square feet, according to Obeid’s report.
In a statement to CoStar News, FedEx, headquartered in Memphis, Tennessee, said it is “exploring opportunities to optimize our network in response to ongoing volume growth and is engaged in discussions with local officials for the potential leasing of package distribution centers in Newark and East Brunswick.” The company, headquartered in Memphis, Tennessee, “does not disclose specifics of a project until all aspects have been finalized.”
Williams-Sonoma is also likely trying to accommodate the rising tide of online orders by consumers. The company, based in San Francisco, didn’t immediately respond to an email seeking comment.
The U.S. industrial real estate market had been skyrocketing because of the rise of e-commerce, and that trend was exacerbated by the pandemic last year, with individuals homebound and shopping on the internet. In New Jersey, the logistics sector last year was largely driven by e-commerce giant Amazon leasing a lot of large distribution sites, 7.5 million square feet, but it was not a player in the first quarter this year, according to Obeid.
Williams-Sonoma has preleased more than 1 million square feet in New Jersey. The chain’s locations include a store in Williamsburg, Virginia. (CoStar)
Amazon has essentially taken a “pause” in leasing huge distribution hubs in New Jersey because its priority now is establishing smaller so-called last-mile delivery stations, Obeid said.
United Parcel Service was a player in the first quarter, by preleasing 880,000 square feet at 42 Military Ocean Terminal in Bayonne, New Jersey, a transaction previously reported by CoStar News.
In its most recent report on the Garden State’s industrial market, CoStar wrote, “Demand has rebounded in Northern New Jersey, after recording a lackluster 250,000 [square feet] of net absorption in the first half of 2020.”
As evidenced by Williams-Sonoma’s and FedEx’s actions, industrial preleasing has been a big factor so far this year in New Jersey. In total, users preleased 4.1 million square feet in development projects during the first quarter, according to Obeid.
“This dynamic has accelerated construction activity, driven by the lack of available space and tenant preference for Class A product,” he wrote in his report.
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