Industrial space in New York City has been in big demand. A CBRE report finds that velocity in the second quarter reached 1.5 million square feet, which is up 67.9 percent from the previous three months and 82.5 percent above the three-year median.
"The market saw a significant number of renewal transactions; demand was driven by transportation, telecommunications, and building supply dealers," CBRE explained.
"Users leased small- and mid-sized space, while increasing their demand for spaces larger than 100,000 sq. ft. On the supply side, the development pipeline fell to 1.4 million sq. ft. after four properties completed construction and no properties broke ground."
Specifically, CBRE attributed a big portion of the activity to the city's Metropolitan Transportation Authority choosing to renew a number of leases. This includes the public benefit corporation posting the third and fourth largest leases in the second quarter, occupying 151,068 and 118,430 square feet, respectively, in Springfield Gardens and East Elmhurst. NYC Dot and Spectrum ranked first and second, with their 212,094 and 198,282 square foot leases, respectively.
Also, supply was limited, as just four properties for 434,000 square feet were delivered, with no new ground breaking happening in the second quarter.
"There were just five properties under construction totaling 1.4 million sq. ft., most being Class A space scheduled to deliver by year-end," CBRE said, while warning that "these deliveries could exacerbate the oversupply of Class A industrial space, which had an availability rate of 23.6% at quarter-end."
Meanwhile, there were some troubling signs. Most notably, rents plummeted by eight percent to $29.34 per square foot. CBRE attributed the reasoning to lower cost availabilities getting added to Queens and Brooklyn.
Also, industrial employment in NYC fell by 0.5 percent in the three months through June, quarter-over-quarter.
The uncertainties lying ahead and how the market will respond when the full impact of tariffs hits remain to be seen. The economic data in the coming months will be something worth watching, as June marked the third straight month that inflation spiked.
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