New York City is proving to be a key growth market for industrial, as a second-quarter report from Colliers focuses on the outer boroughs in the metro — which excludes Manhattan.
The areas Colliers tracked include South and North Brooklyn, Staten Island, Northeast Queens, the Bronx, Northwest Queens, Central Queens and South Queens.
Overall leasing in the outer boroughs in the second quarter surged by 177.5 percent from the previous three months to nearly 1.6 million square feet. Colliers noted that this was driven by "major renewals in Brooklyn and Queens."
"Government users were responsible for the bulk of these leases as the MTA recommitted to 374,000 square feet across four properties in Queens," the CRE firm further explained.
Some other top leases included NYC DOT taking 212,000 square feet in Long Island City and Spectrum renewing for 200,000 square feet in North Brooklyn.
Even if you take away renewals, NYC's outer boroughs still would enjoy a 46.5 percent surge in leasing. Sales volume was strong at nearly $335 million, up 21.6 percent quarter-over-quarter.
For net absorption, although still negative at -53,261 square feet, it improved from -224,738 square feet.
While investment and leasing demand remain strong, the market does have its glaring issues. For example, availability ticked up by 10 basis points to 9.5 percent and is well elevated from the 7.6 percent rate seen 12 months prior. The segment is the highest in Staten Island and the Bronx, which saw their rates at 17.9 percent and 15.3 percent, respectively.
Another poor trend was average asking rents declining to $27.56 per square foot, from $27.85 per square foot. Colliers attributed this to landlords "offering more generous free rent, subdivided space and tenant improvement allowances" to lure smaller tenants. But it appears to be a fight for quality in the market.
"Class A space continues to command a significant premium to the overall market, with some new developments quoting rents in the mid to high $30s per square foot," Colliers highlighted.
The good news for industrial landlords in NYC's outer boroughs is that construction continues to dwindle. Just 1.58 million units were underway in the second quarter, almost half the nearly three million square feet posted a year ago. Colliers expects this trend to continue during the second half, citing "ongoing zoning challenges and high capital costs."
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