Industrial Sales in NYC’s Outer Boroughs Decline Even as Leases Skyrocket
By Isabelle Durso August 7, 2024 2:46 pm
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Industrial sales in New York City’s outer boroughs have declined this year, even as leasing activity outside of Manhattan continues to rise, according to a recent report.
Industrial real estate brokerage AEBOV found that Brooklyn, Queens and the Bronx saw 44 total transactions during the first half of the year, a 19 percent decrease compared to the same period in 2023.
The 44 transactions totaled $558 million, a 22 percent decrease from the first half of 2023. On average, industrial properties had an average cap rate of 6.1 percent and sold for 85 percent of their asking prices, according to the report.
AEBOV Founder Daniel Tropp told Commercial Observer that the lower sales volume could be attributed to rising interest rates over the past two years.
“We expect that once rates level off and reverse and start dropping, sales volume will inevitably increase again,” Tropp said.
The majority of the buyers of outer borough properties, 54 percent, were owner-occupiers, following similar trends as the office market, according to the report. That was followed by small and mid-sized investors, who were behind 36 percent of the deals, and institutional investors, who accounted for 10 percent.
Those investors were likely to prioritize buildings with favorable loading positions, parking availability and close proximity to major highways.
Queens saw the highest total dollar amount in industrial sales so far this year, at roughly $308 million with an average of $434 per square foot. That was followed by Brooklyn at approximately $238 million, an average of $399 per square foot, and the Bronx at about $12.4 million, with an average of $480 per square foot. (The report does not cover Staten Island.)
As industrial sales decrease in the outer boroughs, industrial leases in the areas are skyrocketing. Leasing activity outside of Manhattan hit a five-year high in the first quarter of 2024 at 1 million square feet, according to a report by Cushman & Wakefield.
That was up 83 percent from the 545,401 square feet signed during the same period last year and a whopping 173 percent from the 366,626 square feet leased last quarter, the report found.
The largest outer-borough industrial lease during the first quarter of 2024 was film production company Manhattan Beach Studios’ 240,000-square-foot deal at 66-31 and 66-35 Otto Road in Glendale, Queens.
But, even with the strong leasing, industrial took another hit with 11 existing industrial properties sold in the first half of 2024 slated to be redeveloped into other asset classes. That represents a loss of 244,967 existing industrial square footage, AEBOV’s report found.
On the flip side, sales of industrial outdoor storage, or land sites, increased significantly since last year. Industrial land sales for the beginning of 2024 accounted for nearly $128 million in dollar volume and over 1.1 million square feet of total land with an average of $204 per square foot, the report found.
Isabelle Durso can be reached at idurso@commercialobserver.com.
