The vacancy rate in New Jersey's industrial market shrunk to 3.4% in the third quarter, according to a new report, and analysts don't expect demand to loosen up for at least another year or two.

This, even as the average asking rent for warehouses rose 15.6%, more than six percentage points above a five-year rolling average calculated by Newmark.

"We don't really see any ceiling, particularly for asking rents, as long as the vacancy is this low," Colin Hyde, Newmark research analyst, said.

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According to Hyde, as companies rebound from the COVID-19 pandemic, they are finding that e-commerce is an ever-increasing portion of their business.

He said even Williams-Sonoma, which has a long history of brick-and-mortar stores, now conducts 70% of its sales online, and earlier this year leased 1 million square feet of warehouse space near Exit 8A of the New Jersey Turnpike, in the Monroe-South Brunswick area.

New Jersey is and has always been a major access point, Hyde said, and so the artery that is the Turnpike remains desirable for companies to find land.

Trouble is, that land is becoming more and more scarce, especially in the span's northern half.

"As you kind of go south on the Turnpike corridor, I think you see a lot of the modern space, the new construction that's really been in demand," Hyde said. "As developers are starting to build, immediately these tenants are snatching up everything that comes on line."

Hyde said that if available land dries up completely in New Jersey, companies may go one of two ways: westward into Pennsylvania, where rents would be lower, or up into the five boroughs of New York City, to put themselves right at the feet of consumers.

But for now, the supply constraints will just keep pushing rents higher here.

And that's just fine with most retailers, according to Hyde, citing a "spillover effect" from Amazon, now the state's largest private-sector employer with about 50,000 workers spread across 24 million square feet of property.

"Other companies are trying to compete with them and reconfigure their supply chains, so to respond to the demand," he said.

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