NJ industrial markets thriving, says C&W report.

Notably strong leasing and user sales activity, significant investor sales volume and increasing land prices illustrate the continued momentum that defines the Northern and Central New Jersey industrial markets as we head into the final months of 2004.

Since the beginning of the year, available space in Central New Jersey has decreased by 800,000 s/f. In the northern counties, nearly 5 million s/f of additional product has entered the market.

Yet even with the new product, there is not a concern for oversupply, as transactional velocity continues unabated. Nearly 19 million s/f of leases through the first three quarters of the year reflect the robust demand we are seeing. Among the most notable third quarter deals in Northern New Jersey, Mohawk Industries leased the former 606,800 s/f Ford distribution center in Teterboro. In Central New Jersey's Middlesex county, The Children's Place Retail Stores leased 526,400 s/f at Turnpike Crossing I in South Brunswick. In total, seven lease transactions of more than 100,000 s/f closed in July, August and September.

User and investor sales activity remains voracious as well. During the third quarter alone, some 6 million s/f of property changed hands. In the largest user sale, CNC Associates purchased the 656,745 s/f 101 Kentile Road property in South Plainfield. Aurobindo Pharma, Raymore & Flanagan and Haddad also closed on buildings larger than 150,000 s/f.

On the investor front, AMB acquired 29 buildings in Fairfield, totaling nearly one million s/f. Other "trophy" industrial property sales included 145 Cliffwood Ave., a 731,244 s/f warehouse in Aberdeen and the 385,000 s/f Unilever research campus in Edgewater.

To keep up with demand for modern warehouse facilities, developers continue to build--especially in Middlesex county, where more than 80% of the state's industrial development is occurring. However, an extraordinary amount of development is set to launch between Turnpike Exits 10 and 15. Interestingly, of the 8.4 million s/f currently under construction, 62% is being built on spec, reinforcing the overall feeling of confidence in the market.

During the third quarter, developers completed five projects totaling nearly 926,000 s/f. This includes the second warehouse building at Keystone's Greenville Yards in Jersey City. To date, the 343,000 s/f speculative building remains vacant. Major build-to-suits were also finished as for Ford Motor Company (300,000 s/f in Cranbury) and Gargiulo Produce (150,000 s/f in Hillside).

Major projects still underway include 1.1 million s/f for Barnes & Noble in Monroe, 771,000 s/f for Home Depot Import in Cranbury and 600,000 s/f for McMaster-Carr Supply Company in Washington township. The largest speculative project underway is at Heller Park in South Brunswick. Sappi Fine Paper has pre-leased half of the 1.2 million s/f project. Others include a 750,000 s/f Keystone building in South Brunswick, a 427,000 s/f facility at the Rock Group FTZ in Cranbury, 695,000 s/f at 1000 Industrial Ave. in Raritan Center and 418,000 s/f at Turnpike Crossing III in South Brunswick.

Looking ahead, a number of trends in the market hold significant potential impact. We are waiting with interest to see how the new development and brownfields redevelopment taking place in the relatively untapped market between Jersey City and Perth Amboy will affect activity at Exits 8A, 7A and 7. Will lower pricing keep tenants in the currently thriving southern Central New Jersey market or will proximity to Manhattan draw them further north?

To date, investors have not been swayed from making land purchases to the south.

In fact, sites are turning over at extraordinary prices.

Coupled with rising construction costs, this may well result in strong upward pressure on rents. For tenants looking to lease, our advice within this context is to commit sooner rather than later.

Still, demand remains strong, and we expect that it will continue regardless of potential rising rental rates. With an appropriate amount of supply meeting this demand, ample opportunity exists to continue making deals.

As such, the New Jersey industrial market is well positioned to enjoy continued growth and progress.

STAN DANZIG

EXECUTIVE DIRECTOR

CUSHMAN & WAKEFIELD OF NEW JERSEY, INC.