📢 Good morning,
The 1.5 bsf Tri-State warehouse corridor held rents while vacancy reset to 8.7%. Demand stayed active, led by 3PLs, food & beverage, and retailers. Port throughput rose 4.9% YoY in H1, supporting leasing and keeping fundamentals resilient despite higher rates. Near-term: normalization, not distress. Medium-term: tightening resumes as supply moderates and demand outpaces completions.
Inventory: ~1.5 bsf.
Vacancy: 8.7% (up from trough ~5%).
H1 2025 leasing: 26.9 msf; on pace to beat 2023.
H1 2025 completions: 14.8 msf; moderated pipeline.
Port NY/NJ H1 2025 volume: +4.9% YoY; 4.4m TEUs through June.
Forecast rent gains (PA I-81/I-78): +3.0% in 2026, +4.0% in 2027.
1) Demand drivers
3PLs, food distributors, and e-commerce retailers anchor deal flow. Port growth and a 60-million population within a 5-hour drive sustain last-mile and regional distribution demand.
2) Supply & product mix
Deliveries slowed to 14.8 msf in H1. Groundbreaks continue in PA’s I-81/I-78 and parts of South NJ. New projects skew smaller and specialized (e.g., cold storage), reflecting targeted tenant needs and tighter capital.
3) Pricing & vacancy
Vacancy at 8.7% reflects a return toward pre-pandemic balance. Landlord pricing power held in infill submarkets with barriers to new supply. Lease-up timelines lengthened versus 2021–22.
4) Forward setup
C&W baseline calls for growth resuming from 2026 with rent re-acceleration led by constrained nodes and PA corridors. Expect occupancy to grind higher as deliveries ebb and port-led demand persists.
Resilience, not rollover: Normalization of vacancy with steady rents.
Port tailwind: H1 throughput +4.9% YoY underpins warehouse need.
Selective development: Fewer megas; more specialized, tenant-driven builds.
Tighter again later: Forecast rent gains 2026–27 as demand overtakes supply. Leasing: Target 3PLs, F&B, and retailers tied to port flows. Prioritize turn-key space, gate queuing, and trailer parking to win cycles tied to seasonal imports.
Underwriting guardrails:
Rent growth: ~3%/yr core infill; 1–2% peripheral near term.
Vacancy buffer: underwrite 4–5% even in historically tight nodes.
Lease-up: assume 9–12 months for new spec.
Costs/exit: carry elevated hard costs, contingency 10%+; exit caps ~+50 bps vs 2021 troughs.
Tenant quality: For single-tenant big boxes, haircut renewal probability where 3PL contracts are short; model flat to slightly negative releasing spreads if lease rolls during softness.
Location risk: Slightly stricter hurdles for assets far down the logistics chain; favor last-mile/infill with structural barriers.
Vacancy path: Near cyclical peak now. Drift down possible by late 2025 if absorption holds and starts stay muted.
Rent trajectory: Re-acceleration first in Northern NJ and NYC boroughs; PA big-box corridors follow with forecast gains in 2026–27.
Watchlist: Port volumes, Q4 retail inventories, trucking spot rates, warehouse labor hiring, large tenant moves.
Tri-State Industrial Vacancy vs Net Absorption (H1 2019–H1 2025) — bars for absorption, line for vacancy %
Port of NY/NJ Cargo Volume (2018–H1 2025) — line of throughput in millions of TEUs
