NYC's New Mega-Warehouses Are Arriving Vacant

New York City’s industrial market in 2024 is seeing deliveries of mega-warehouses without any pre-leasing commitments.

The slowdown in demand combined with an increase in availabilities across all Class segments pushed vacancy to 3.1% at the end of the year and severely impacted “mega-box” developments, according to JLL’s Q4 market report for NYC Outer Boroughs.

“This normalized demand environment has caused new projects to deliver vacant for the first time in NYC, which differs from previous years when the market saw nearly all construction projects deliver fully preleased,” JLL’s report said.

Turnbridge Equities’ 1.3M SF Bronx Logistics Center, which is scheduled to deliver in the second quarter, remains available for lease, while half of the space at the 968K SF multi-story warehouse at 2505 Bruckner Boulevard in the Bronx remains available, the report said.

Delivered in 2022, 2505 Bruckner is located at the exchange of the Cross Bronx, Hutchison River, and Bruckner Expressways. The waterfront facility features 32-foot high ceilings, entrance and exit ramps on all levels and an overall design that maximizes “strategic flow.”

There were 88 lease transactions in NYC last year, a new record, but leasing velocity was held to 2.1M SF. Activity was concentrated in small to mid-sized deals which brought the average lease size down to 23,692 SF, a new low, JLL said. Only one transaction topped 100K SF in the fourth quarter.

NYC’s industrial market has reset after a boom in e-commerce/last mile companies taking up space during the pandemic. JLL said the long-term outlook will be favorable for landlords.

“Despite creeping higher, vacancy remains constrained as it is forecasted to stay below 5% over the next several years, meaning it is still a healthy market for landlords,” the report said.

“The macroeconomic environment appears to be less hazy and [there are] indications that global freight markets are recovering. This is a positive sign for landlords with vacancies, especially new construction projects,” JLL’s outlook said.

Aside from projects currently under construction, JLL said there are only 343K SF of proposed developments expected to deliver in NYC before 2026.

“As a result, we expect to see stronger leasing volumes on Class A new construction projects, especially ones with smaller floor plates such as IPG’s 23-30 Borden Ave in Queens and LBA/RXR’s Red Hook Logistics Center in Brooklyn,” the report said.