Industrial Leasing in NYC Slows to Pre-Pandemic Levels: Report

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New York City’s red-hot industrial market has started to chill, according to a  new report from CBRE.

Companies leased 730,000 square feet of industrial space in the first quarter of 2023, a 52 percent drop from the previous quarter’s 1.5 million square feet and 25.6 percent lower than the three-year quarterly average of 1 million square feet, according to the report. 

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“The once voracious demand for space has cooled to pre-pandemic levels and pricing continues to moderate,” the report said. “The New York City industrial market remains healthy although economic pressures are mounting.”

The pandemic pushed the industrial market to new heights as companies rushed to score space to get products to online shoppers. But the higher cost of debt thanks to rising interest rates has encouraged some firms to shelve their expansion plans, slowing industrial leasing, according to the report.

The interest rates and economic uncertainty have also caused a slowdown in the construction of new industrial buildings in the five boroughs. In the first quarter, 12 properties covering 5.8 million square feet were underway, a 19.9 percent decrease from the same quarter in 2022, according to the report.

Still, demand for industrial properties remains strong, if lower than the pandemic boom, according to CBRE (CBRE). The availability rate for industrial space fell by 0.3 percentage points to 6.5 percent quarter-over-quarter, while asking rents rose slightly by 2.1 percent to $25.59 per square foot in that same period. 

Brooklyn saw the most leasing in the first quarter with 400,000 square feet, a 24.5 percent increase from the first quarter of 2022.

The New York City Department of Transportation made a huge dent in Brooklyn when it took 156,227 square feet for space to store its streetlights at 101 Varick Avenue in East Williamsburg, in the biggest industrial deal in the city in the first quarter. Lighting company Flos USA also inked a lease in East Williamsburg for 43,976 square feet at 568 Meserole Street in the third-largest transaction last quarter.

Meanwhile, deal volume in the Bronx rose 43.5 percent annually to 105,000 square feet in the first quarter, thanks to scoring the second largest industrial lease in the first quarter with Kamco Supply Company taking 57,44 square feet at 100 Zerega Avenue.

Queens’ leasing volume remained unchanged from a year prior at 222,000 square feet across 28 deals in the first quarter. Staten Island only saw a single, 2,000-square-foot industrial lease close in the entire period.

CBRE doesn’t track Manhattan industrial leasing due to the small amount of industrial space on the island.

Celia Young can be reached at cyoung@commercialobserver.com.