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Notable inventory additions exacerbate vacancy as the sector contends with headwinds.
Last year was a rocky period for the city’s tech and financial firms, which shed some positions, and by relation, impacted the demand for last-mile delivery space servicing these highly compensated personnel. While recruitment across traditional office-using sectors is expected to pick up in 2024, logistics providers may hold off on industrial leasing commitments until the city’s employment base — and, by extension, consumer spending — is on firmer footing. Amid these demand headwinds, the city is expected to see record-breaking speculative supply additions, headlined by the 1.3 million-square-foot Bronx Logistics Center, located less than a mile from the RFK-Triborough Bridge. A pipeline including several 100,000-square-foot-plus assets will put particular pressure on existing spaces in the Bronx, Brooklyn, and Queens. However, a growing residential base across these boroughs will help integrate this year’s deliveries moving forward. As of early 2024, more than 40,000 multifamily units are underway in these areas, providing a solid foundation for long-term logistics demand.
Investors target distribution opportunities in Brooklyn and Queens.
Contrasting broader metro-level trends in 2023, deal flow in the $15 million-plus tranche proceeded at levels comparable to those from 2019, indicating that institutional investors are readily identifying opportunities. Buyers are most active along waterfront locales in Brooklyn and Queens, with notable clusters in the Gowanus and Sunset Park areas. These neighborhoods are well-positioned for spillover demand from the Port of New York and New Jersey. Assets have also been observed changing hands in the sub-$2 million tranche here, fostering a varied buyer pool. Investors are also pursuing trades in the Long Island City and Astoria neighborhoods, where residential growth is driving warehouse demand.
+1.1%
EMPLOYMENT: Overall employment will grow by 50,000 positions in 2024, assisted by a recovery among traditional office-using segments, representing roughly one-fifth of this year’s increase.
5 MILLION sq. ft.
CONSTRUCTION: This year’s delivery schedule marks the most significant inventory expansion noted since at least 1996, with the majority of square feet underway accounted for as of March.
+1.1%
VACANCY: The addition of multiple speculative facilities translates to the most rapid upward adjustment to the metro’s vacancy rate in various decades, driving the metric to 7.2 percent.
+1.1%
RENT: Record vacancy entering 2024, which is slated to increase as the year progresses, will drive the mean marketed rate down to $24.11 per square foot in 2024.
INVESTMENT:
The East Williamsburg area has seen multiple owner-user deals in late 2023, as it is popular among artisan craftsmen seeking space for boutique manufacturing operations.