New York City to Limit New Last-Mile Delivery Centers

With the mayor needing its approval to remove regulations that shackle real estate, the City Council seized the opportunity to add a new one.

Developers aiming to build last-mile delivery warehouses may soon be told “no,” a surprise outcome from the Council’s review of Mayor Eric Adams’ City of Yes for Economic Opportunity.

Sometime next year, development of such facilities — which has proliferated to meet consumer demand for quick delivery of e-commerce packages — will need approval from the City Council in the form of a special permit. Until now, construction of distribution centers was allowed as-of-right, meaning without politicians’ say-so, in industrial areas.

Warehouses have been a consistent money-maker for industrial developers in the past decade as Amazon and other retailers pushed for ever-faster delivery times. But the wave of projects drew objections from residents and their elected officials for attracting trucks.

Soon, under the Council’s tradition of “member deference,” a single representative will be able to block construction of a local warehouse. The mayor acquiesced to the provision to get his own proposals through.

The Council in 2021 did the same thing to hotel projects, although in that case it had the full-throated support of the mayor, Bill de Blasio. The special permit requirement for hotels has virtually halted their development. A similar fate may be in store for last-mile warehouses.

However, until the change is made, “it’s probably going to heat that market up even faster,” said land-use attorney David Rosenberg of Rosenberg & Estis. “Much like hotels, people are going to be in a rush [to develop] before anything like this becomes law.”

The exact date for the change is to be determined. The Adams administration agreed to begin “scoping” (an early step in the environmental review) on a new regulation by March 2025. The process is likely to take months.

Once special permits are required, new competition for warehouse owners will be limited, which should allow them to charge ever-higher rents as demand for last-mile facilities increases.

Supporters hailed the reform. Brooklyn Borough President Antonio Reynoso called it a step toward “environmental justice for the working-class,” and City Councilmember Alexa Avilés deemed it “desperately needed relief” from asthma, vehicle congestion, and air and noise pollution.

Avilés, who represents Sunset Park and part of Brooklyn’s western shoreline down to Red Hook, tried to implement a permit requirement for last-mile facilities in 2022, when more than 2 million square feet of industrial space was completed and leased in the outer boroughs by Amazon alone, according to a Colliers report.

The availability of large industrial tracts in low-density areas has resulted in a concentration of last-mile facilities in certain neighborhoods, including hers.

“Eight newly constructed last-mile facilities [in Sunset Park and Red Hook] could result in 8,000 new daily vehicle trips all feeding into the same roads,” Avilés wrote in 2022. “This unprecedented level of new traffic in a small area necessarily has impacts on congestion, air quality, noise, and aging infrastructure.”

It is not clear how much traffic will be reduced, because customers’ orders will still be trucked to them.

Last-mile delivery facilities tend to be larger than typical warehouses and operate day and night. Two of their most ambitious developers are Innovo Property Group and Turnbridge Equities, which plan to build more than 4 million square feet of warehouses in the Bronx, South Brooklyn and Northwest Queens.

However, demand for last-mile delivery has abated since Avilés began her quest. Even Amazon acknowledged having too much space and began pulling back.

Other modifications to the mayor’s proposal by the City Council included disallowing corner stores from opening in lower-density residential neighborhoods and limiting upzoning in those areas. The full Council is expected to formally approve the legislative package next month.

This article has been revised to clarify the timeline for implementation of the special permits regulation.