Northern New Jersey’s industrial market in mid‑2026 reflects a mix of cooling labor conditions and exceptionally strong real estate fundamentals, according to a new report from CBRE.
Industrial employment declined 1.0% year over year through May 2026 and slipped 0.4% in the fourth quarter, yet overall employment in the sector remains 4% above its level five years ago.
The trade, transportation, and utilities sector—which includes logistics and fulfillment—shed 6,400 jobs year over year and has been trending downward since its peak in late 2022, signaling a gradual normalization in labor demand even as real estate performance remains robust.
Leasing activity surged in the second quarter, reaching 8.0 million square feet and marking only the fourth time on record that quarterly volume surpassed that threshold. Combined with a strong first quarter, first‑half leasing totaled a record 17.2 million square feet.
Occupiers translated this momentum into meaningful occupancy gains, driving 5.9 million square feet of net absorption as tenants took possession of space leased earlier in the year. The flight‑to‑quality trend accelerated sharply, producing the largest quarterly drop in Class A vacancy ever recorded.
Class A vacancy fell 270 basis points to 15.3%, while overall vacancy declined to 7.6%. At the same time, the development pipeline contracted to 7.3 million square feet, tightening future supply and beginning to shift leverage back toward landlords in core Turnpike submarkets, even as tertiary areas with more availability remain comparatively tenant‑friendly.
Demand anchored by 3PLs
Demand was anchored by 3PL users, who capitalized on occupancy‑focused landlords and continued to pursue modern, high‑efficiency facilities.
Three of the five largest Q2 leases were signed by 3PLs, including the quarter’s largest: US Elogistics/GOFO’s 800,000‑square‑foot commitment in Perth Amboy. Nineteen new leases and expansions over 100,000 square feet were completed, averaging 215,000 square feet—slightly below Q1’s average but still indicative of sustained large‑block demand. Market intelligence suggests continued near‑term strength, particularly for requirements of one million square feet or more.
Class A leasing remained elevated, with 22 deals totaling 3.6 million square feet, well above five‑year averages. Tenants remained highly selective, prioritizing buildings with optimal design and proximity to the NJ Turnpike. This preference pushed demand southward into Central and Southern New Jersey as Northern New Jersey’s Class A availability thinned; only 19% of new Class A leasing occurred in Northern New Jersey, below the five‑year average of 25%.
While 3PLs accounted for 38% of total activity, auto‑related, building‑supply, and food‑related tenants also contributed meaningfully. Offshore 3PLs signed 1.5 million square feet, representing 19% of quarterly leasing, though landlords have become more selective toward this tenant type as vacancy tightens for premium space.
Supply conditions improving
Supply conditions continued to improve. Overall vacancy fell to 7.6%, and Class A vacancy dropped to 15.3%, supported by record Class A net absorption of 6.6 million square feet.
Of the 2.7 million square feet delivered in Q2, 63% was preleased—driven largely by TJX’s 1.3‑million‑square‑foot commitment in Lyndhurst—reversing the recent trend of new deliveries adding vacant space. Class A availability is becoming increasingly scarce in core Turnpike submarkets, where options above 400,000 square feet are limited and the construction pipeline offers little relief.
Tertiary markets with more active development will experience a slower shift toward landlord leverage. The construction pipeline narrowed 3.4% from Q1, with starts totaling 1.9 million square feet, including a major project in Perth Amboy. Northern New Jersey, constrained by limited developable land, recorded only one 70,000-square-foot start in the Meadowlands.
Rent trends reflect tightening supply in prime submarkets. Average Class A asking rents fell 4.2% year over year to $18.85 per square foot, dropping below $19.00 for the first time since early 2024. All‑classes asking rents declined 4.6% to $16.82, their first dip below $17.00 since early 2023.
Effective rents remained stable due to elevated concessions and steady taking rents, but tightening availability in key size segments is beginning to establish a floor for pricing as demand for modern facilities persists.
