NYC Industrial Leasing Activity Drops 47%
Vacancy rate dropped while net absorption and average asking rents rose.
The NYC industrial market sent mixed signals in the third quarter, with leasing velocity dropping nearly by half while positive net absorption and average asking rents increased.
Leasing activity in Q3 2023 was about 525,000 square feet, a quarter-over-quarter decrease of more than 47% and a year-over-year drop of nearly 30%, according to a market report from CBRE.
The overall vacancy rate in NYC’s industrial market dropped by 20 basis points (bps) to 5.5% in the third quarter, with the Class-A vacancy rate dipping to 3.6%. The average asking rent citywide for all asset classes increased by 2.4% to $26.74 per square foot.
Leasing activity remained relatively consistent quarter-over-quarter in the Bronx, Brooklyn and Staten Island markets but fell sharply in Queens.
Top drivers of leasing velocity included retailers, waste management service providers, and construction merchant wholesalers. The market saw a lack of e-commerce-related leasing activity, CBRE’s report noted.
Brooklyn recorded the most leasing velocity of any borough with nearly 320,000 square feet leased, a quarter-over-quarter decrease of 1.8% and a year-over-year decrease of 7.2%.
Brooklyn recorded the largest Q3 lease transaction at 1970 Pitkin Avenue in the East New York submarket; Net Zero, an eco-friendly retailer leased 70,000 square feet of warehouse space from landlord Seagis Property Group.
In addition to East New York, the Greenpoint/Williamsburg and Canarsie/Flatlands submarkets also had notable leasing.
Queens saw total leasing velocity of about 133,000 square feet, a quarter-over-quarter decrease of about 78%, but still a 14.4% increase in a year-over-year comparison. Leasing was most active in the Sunnyside and Springfield Gardens submarkets.
Net absorption totaled 487,000 square feet in Q3 2023 in NYC. Queens saw positive net absorption of just under 10,000 square feet.
Total vacancy in Queens increased 40 bps quarter-over-quarter and 120 bps year-over-year to 6.2%. The Ozone Park submarket saw the highest amount of positive absorption, 262,000 square feet, with the delivery of Terminal Logistics Center.
Terminal Logistics Center was the only industrial delivery in Q3. The 386,000-square-foot facility near JFK Airport is leased to DO & CO, a company specializing in airline catering.
Industrial properties under construction in NYC encompass 5.6 million square feet, with a strong pre-lease rate of 48%. An additional 17 projects encompassing 4.8 million square feet are in the development pipeline.