Industrial demand in the Northeast has slowed, leading to a significant reduction in construction completions, according to CBRE’s Northeast Industrial & Logistics Construction Report. The development pipeline contracted by 20.8% quarter-over-quarter, shrinking to 24.4 million square feet, with only 3.4 million square feet breaking ground in the first quarter. Despite 10.2 million square feet entering the market, pre-leasing rates rose by 560 basis points to 22.6%. Nearly all of the 10.3 million square feet delivered during the quarter consisted of unleased Class A space.
New development decelerated from the fourth quarter of 2024 to the first quarter of 2025 due to concerns about oversupply from prior buildouts and broader economic challenges. These developments occurred before the full impact of the Trump administration’s tariff policies and associated uncertainties could be felt, indicating that this trend may persist.
Construction completions are expected to decline steadily over the coming quarters, dropping to just under 8 million square feet in the second quarter, falling further to slightly above 4 million square feet in the third quarter, and increasing modestly in the fourth quarter. Looking ahead to 2026, completions for the first and second quarters are projected to be around 1 million square feet each, with a rise to nearly 6 million square feet in the third quarter.
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CBRE analyzed eight key markets within the Northeast region: Boston, Hartford, New York City, Long Island, Northern New Jersey, Central New Jersey, Philadelphia, and the Pennsylvania I-79/I-81 Corridor. Boston currently has 1.8 million square feet of speculative space under construction, with no pre-leasing activity and a Class A vacancy rate of 17.2%. Some strategic projects are being revived in 2025, driven by a more favorable investment climate and the core market’s continued strength.
Hartford’s construction pipeline has sharply declined compared to two years ago, reflecting weakening demand that began in early 2024. At present, only 0.3 million square feet is under construction, with no pre-leasing and a Class A vacancy rate of 17.1%. In New York City, the pipeline decreased to 3.0 million square feet following the delivery of a 680,000 square foot property in Long Island City. Most unleased properties under construction are Class A distribution and logistics spaces, but an oversupply of Class A inventory pushed the vacancy rate up by 630 basis points quarter-over-quarter to 24.1%.
Long Island has 0.4 million square feet under construction with a relatively low pre-lease rate of 30%, which may exacerbate the already high Class A vacancy rate of 31.5%. Northern New Jersey saw 11 new properties totaling 2.1 million square feet enter the market in the first quarter. Meanwhile, 13 properties remain under construction with a pre-lease rate of 50.2%, up from 42.4% in the previous quarter. Despite this, the Class A vacancy rate stands at 30.9%, partly due to companies downsizing their space requirements, which contributed to a 50-basis-point increase in vacancy quarter-over-quarter.
Central New Jersey has 17 properties under construction, totaling 3.5 million square feet, with a pre-lease rate that rose to 13.2% from 4.2% in the fourth quarter of 2024. Seven properties with a combined 1.2 million square feet were completed recently, and available large-block space increased by 100 basis points quarter-over-quarter. The Philadelphia metro area delivered over 3 million square feet of new construction during the quarter, nearly half of which was located in Southern New Jersey. There are 9.2 million square feet currently under construction, with 6.2% pre-leased and a Class A vacancy rate of 24.0%.
Lastly, the Pennsylvania I-79/I-81 Corridor faces concerns about oversupply that could delay vacancy recovery. The area has 2.6 million square feet under construction, with 19.4% pre-leased and a Class A vacancy rate of 14.3%.
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