The Northeast market for industrial property has had its hottest year ever, even as concerns about economic conditions have grown.
Industrial tenants have leased a net amount of 44.5 million square feet in the region so far this year, the most in the market’s history, according to a new report from brokerage firm JLL.
And demand has continued to grow.
As of the third quarter, industrial owners and tenants were searching for 98.4 million square feet of facilities across the Northeast, a 17.6 percent rise over the past three years.
The demand drove under-construction stock to 70 million square feet, the highest level in the region’s history, with 54.5 million still available to pre-lease.
JLL’s Rob Kossar and Leslie Lanne recently brokered the largest industrial lease in New York City this year, as Amazon inked a deal for 568,000 square feet at Innovo’s massive Bronx logistics center.
The boom, however, may prove the peak for the industry, which was juiced by record e-commerce growth during the pandemic.
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“The market has begun to see a normalization in leasing activity closer to their pre-pandemic levels,” the report reads. “The uncertainty across the economy has made occupiers more cost-conscious.”
Buyers of industrial space are also fewer, thanks to rising borrowing costs.
“Although there is significant dry powder across the asset class, the macroeconomic landscape and uncertainty has resulted in a slimmer buyer pool than years prior,” the report reads.
Still, the Northeast industrial market will remain favorable to landlords for years to come, JLL predicts, with leasing velocity still above pre-pandemic levels and vacancy rates at all-time lows.
The occupancy rate of warehouse, distribution and manufacturing facilities in New York, New Jersey, Pennsylvania and Delaware has averaged 98 percent since the pandemic began.
“Given the hyper-low vacancy environment across the Northeast,” the report reads, “we expect region-wide vacancy to remain below 4 percent, barring a deep economic depression.”