Q3 2022 Industrial Real Estate Report: New York, NY
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
The New York industrial real estate market continued to improve in Q3 of 2022. This year saw absorption gains reach their highest ever due to the delivery of pre-leased projects.
In the outer boroughs, there was a year-over-year 66% increase of 2.5 million square feet leased. The market saw 2.3 million square feet of net absorption, over 53% higher than the previous high a couple of years ago. 84.1% of 2022 completions were pre-leased.
There was also a record of over 1 million square feet leased in the parking and storage market this year as well.
General Area Overview & Demographics
New York City is a vibrant metropolis with a diverse population of over 8.6 million people. The city is home to many ethnic and cultural groups, with the largest being Hispanic, followed by African American, Asian American, and White.
It has been estimated that close to 1 in 3 New Yorkers are foreign-born, making it one of the most cosmopolitan cities in the world.
The city has a median age of 37 years old, and nearly 43% of its population is between the ages of 18 and 34. This young demographic leads to higher levels of education attainment: 45% have at least a Bachelor’s Degree or higher. This educated population provides an excellent opportunity for businesses looking for skilled labor in their industrial market areas.
New York City also has an incredibly strong economy, with an unemployment rate currently at 4.9%. This low rate helps support both the local small business community and larger firms that depend on economic activity from the area’s residents and visitors.
With a Gross Domestic Product (GDP) of $1.5 trillion, New York City makes up about 9% of the US GDP, making it one of the most important economies in the world today.
New York City is known for its diverse weather, with extremes of both hot and cold temperatures throughout the year. The summers are typically warm and humid, with average highs in the mid-80s (Fahrenheit) and lows in the mid-70s.
Summary of New York City Industrial Space Performance in Q3 2022
The Bronx’s industrial market drove a large portion of net absorption in the outer boroughs, totaling over 325,000 square feet. This has helped the Bronx reduce the availability rate to 7.7%, down from the previous quarter.
And with Staten Island absorbing 52,000 square feet this quarter, its availability rate is now near 1%.
What Are Industrial Space Rents Like in New York City?
The average asking rent for industrial real estate in New York is also rising.
Other than Northeast Queens’ submarket seeing a decrease of 18.5% due to higher-priced products no longer being available, the other submarkets saw an increase.
For industrial space, North Brooklyn had an asking rent of $29.10 per square foot, the highest in the market this quarter. The Bronx was a close second, with asking rent just north of $29.00 per square foot.
Overall, the outer boroughs saw an increase of over 5% in the average asking rent of industrial spaces compared to Q2 2022.
While there was an overall increase, Class A properties remained constant from Q2 2022 to Q3 2022.
Purchase & Leasing Activity
Sales volume is down significantly from last quarter.
The decline in this quarter compared to last was felt in nearly every asset class, including industrial.
Industrial properties, which include manufacturing sites and warehouses, took the largest hit. The outer boroughs saw a 69% decrease this quarter compared to last, posting only $300 million in sales.
This put the New York industrial real estate market not just down quarter-over-quarter but also down year-over-year, with the third quarter of last year seeing almost $400 million in sales.
Industrial space continues to be scarce in the market.
The leasing rate was down slightly. With over 740,000 square feet posted, the market only saw a 2.5% decrease from the two-year average.
Notable Industrial Space Deals in New York City in Q3 2022
Tankhouse’s acquisition of 450 Union Street in Brooklyn was the most notable deal this quarter.
The 9,800-square-foot warehouse property on over a half acre of land was purchased for over $40 million.
Other notable deals are as follows:
- LBA Realty’s acquisition of 100,000 square feet of space for $34 million;
- Innovo Property Group’s acquisition of 60,000 square of space for $21 million;
- Nuverse Advisors acquisition of 1.1 acres for $25 million; and
- Barone Management’s acquisition of 46,000 square feet of space for $22 million.
These are among other notable sales transactions.
New Industrial Space Development Activity in New York City in Q3 2022
The New York industrial real estate market in Q3 of 2022 saw nearly 7 million square feet of properties in development.
In addition, about a dozen planned or proposed projects will bring another 3 million square feet of space into the market.
Industrial real estate in New York’s outer boroughs accounts for 4.9 million square feet of what is currently under construction, with the Bronx accounting for over 1.3 million of that total.
Ground was broken in the South Queen’s submarket at 18222 150th Avenue by Morgan Stanley Prime Property Fund as they began their 90,000-square-foot project, which is estimated to be completed in 2023.
An additional 3 million square feet of industrial buildings are waiting to break ground in the outer boroughs’ industrial market.
Market Forecast for New York City’s Industrial Space Market in 2023
Being one of the largest markets in this field, industrial real estate in New York going into 2023 seems to be modestly healthy.
The city will always be in demand for more space, and supply isn’t matching it at the moment. That factor should continue to push asking rents and sales prices up as the market continues throughout the year.
Takeaways for Industrial Space Investors
The New York industrial real estate market provides opportunities for investors that have the margin for slower returns in the near future but the potential for worthwhile returns in the long term.
Every investment needs to be thoroughly researched, and the more risk tolerance, the better for anyone looking to get in on industrial real estate in New York.
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