New York City’s Outer Boroughs Reclaim Industrial Crown

The warehouse boom of the early pandemic days may be over, but New York City’s outer boroughs still reign over the rest of the industrial market.

Space in the Bronx, Brooklyn, Staten Island and Queens boasted an asking rent of $26.02 per square foot in the third quarter, according to Cushman & Wakefield data reported by the Commercial Observer.

The rise boosted the boroughs into first place among the 83 markets tracked in a report, surpassing the San Francisco Peninsula for the top spot.

The slight gain comes as the markets plateaud in 2023 after two years on the rise.

Vacancies rose and leasing activity declined in the boroughs, according to the report, which tracks renter-occupied buildings of at least 20,000 square feet.

The industrial vacancy rate rose 20 basis points to 4.4 percent in the outer boroughs from the second quarter. Last year’s historic low of 3.7 percent is fading into little more than a memory for warehouse owners.

New tenants leased 307,000 square feet in the outer boroughs from July to September, a staggering 59.1 percent decline from the second quarter. There has been 1.7 million square feet leased year-to-date, down 37.8 percent from last year.

Demand for industrial space is dropping as the industrial construction pipeline expands off the e-commerce boom. There are 3.5 million square feet of industrial space under construction in the market, 2.6 million square feet of which are expected to open by the end of next year.

Even though the pandemic-era heights appear to be behind the market, Cushman’s Dimitri Mastrogiannis told the Observer that investors remain bullish on industrial real estate and brokers are still keeping plenty busy.

CBRE’s third quarter industrial market report, which accounted for all five of the city’s boroughs, recorded a 5.5 percent vacancy rate. CBRE also reported a higher average asking rent in the third quarter, recording $26.74 per square foot.

Where the reports agree is the biggest lease of the quarter: retailer Net Zero taking 70,000 square feet at 1970 Pitkin Avenue in Brooklyn.

— Holden Walter-Warner