Q3 2022 Industrial Real Estate Report: New York Outer Boroughs, NY

New York City isn’t just the biggest city in the nation: Its residential areas are some of the most densely populated. This is why commercial real estate (CRE) investors look for New York industrial real estate opportunities within the surrounding Outer Boroughs.

During the third quarter of 2022, industrial properties within the Outer Boroughs submarkets saw vacancy rates dropping in all but one area.

Asking rents for the Outer Boroughs’s industrial properties exceeded $24.00 per square foot (PSF) for the first time on record.

If you’re an active investor or plan to lease or purchase an industrial property, this article will provide a detailed snapshot of industrial real estate within New York’s Outer Boroughs.

General Area Overview & Demographics

While New York City is home to over 8 million people, the metropolitan area – which includes the Outer Boroughs and parts of New Jersey and Connecticut – has a population of over 23.6 million.

The area is ethnically diverse, combining the unique skills and culture of the immigrants from Europe, the UK, and Asia who landed in New York over the centuries. The city is still the leading gateway for legal immigrants.

Even though unemployment figures in New York City rose to 6.6% during the second half of 2022, hiring numbers during the last 12 months rose. The city added 294,300 jobs, which included over 33,000 new jobs in trade, transportation, manufacturing, and utilities.

New York City Industrial Space Performance in Q3 2022

Most of New York City’s commercial real estate is found within the Outer Boroughs:

  • The Bronx;
  • North and South Brooklyn;
  • Northwest, Northeast, Central and South Queens; and
  • Staten Island.

New York industrial real estate continued to turn in positive numbers during Q3 2022, as vacancy rates decreased in most Outer Boroughs.

The availability rate fell 40 basis points from Q2, ending up at 6.1%. This was the fourth consecutive positive absorption quarter, bringing the total to 5 million square feet (MSF) during Q3.

Except for South Brooklyn, Central Queens and South Queens, the Outer Boroughs posted positive net absorption numbers that added up to 684,304 square feet (SF).

The Bronx submarket turned in the highest numbers, posting 325,455 SF net absorption.

Industrial Rent Averages in NYC’s Outer Boroughs

Similar to residential rents within New York City, CRE rents vary widely among the Outer Boroughs.

Here are the average industrial asking rents for each borough during Q3 2022:

  • Bronx: $29.02;
  • North Brooklyn: $29.08;
  • South Brooklyn: $19.07;
  • Northwest Queens: $24.83;
  • Northeast Queens: $23.66;
  • Central Queens: $20.61;
  • South Queens: $18.49; and
  • Staten Island: $19.55.

One reason industrial rents and leasing activities are higher in the Bronx and North Brooklyn is that they’re home to more planned and existing vertical warehouses, a concept already popular in Asia.

Purchase & Leasing Activity During Q3 2022

The North Brooklyn borough saw the most activity, with tenants signing up for a total of 465,885 square feet (SF). Low availability (3.5%) in this area helped drive the most expensive ($29.08) asking rents.

The Bronx came in second, with a total of 261,300 SF being leased. Although the Bronx’ availability was 7.8%, average asking rents were almost equal to North Brooklyn at $29.02.

In direct contrast to Q3 leasing activities, sales of industrial properties fell from the previous quarter and year-over-year as well. Fears of a possible recession and rising interest rates were two contributing factors.

  • Industrial real estate in New York’s Outer Boroughs saw sales fall by 72% during the third quarter.
  • Numbers were down from $1.22 billion in Q2 2022, adding up to just $33.5 million.

However, several major sales were recorded during Q3 2022.

Industrial property at two Beard Street addresses in Brooklyn, together with an industrial building at 236 Richards Street, Brooklyn was purchased by LBA Realty for $34 million. The combined properties offer 92,700 SF of industrial space and 49,500 SF of additional air rights.

A 60,000 SF industrial property at 1100 Leggett Avenue, Hunts Point, Bronx was purchased for $21.5 million by Innovo Property Group.

Notable Industrial Space Deals in New York City in Q3 2022

Some of the biggest industrial leases signed during the summer/fall of 2022 were to support the expansion of online retailers.

Amazon continued to expand, with a lease being signed for 250,000 SF of 2505 Bruckner, a new logistics facility in the Bronx.

MPB.com, an online trader of photographic equipment, leased 40,000 SF within South Brooklyn’s Sunset Park.

More properties will enter the market soon, including the following developments.

New Industrial Construction Projects

One of the biggest projects currently underway: a 1.3 million square foot (MSF) property at 980 East 149th Street in Hunts Point, the Bronx.

The logistics center will feature almost 600,000 square feet of warehouse space and parking spots with EV charging stations.

Other projects include two properties purpose-built for Amazon: 55-15 Grand Avenue, a 777,000 SF industrial facility in Western Queens, and 2505 Bruckner Blvd., a 500,000 SF facility in The Bronx.

This Year’s Market Forecast for Industrial Properties and Performance

Although some developers expect a moderate recession in 2023, which could depress leasing activity, inflation is also expected to recede.

This means that well-capitalized investors will still be able to locate attractive deals.

Another positive: lower construction costs, which are expected to recede to around 5% after two years of double-digit gains.

Takeaways for Industrial Space Investors

Even if a recession appears, industrial real estate within NYC’s Outer Boroughs will continue to offer lucrative opportunities.

In addition, investors will experience the unique thrill of doing business in one of the most famous cities in the world.

Your ideal approach is to work with a broker familiar with the territory and prepare to invest plenty of time in research and due diligence.

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