Rezoning, retail interest squeeze industrial inventory
Rents at industrial properties in Brooklyn and Queens are on the rise as rezoning, incoming retail tenants and a recovering economy boost demand and squeeze availability.
A 37-block swath of industrial blocks in Long Island City were rezoned in 2001 for residential and commercial use, and nearly 200 blocks along the North Brooklyn Waterfront were similarly re-categorized in 2005. The loss of such large chunks of space, coupled with a recovering economy that is lifting the number of businesses that want to be located within the five boroughs, resulted in rising rental rates in industrial nabes. This despite the fact that industrial properties have long been thought of as the industry’s “stepchild,” as The Real Deal reported.
The average asking rent per square foot for industrial space in the outer boroughs increased nearly 25 percent, to $14.25 last year, up from roughly $11.50 in the middle of 2011. In 2013 alone, the average rent jumped around 10 percent, according to a report from Crain’s.
“I’ve never seen a tighter market,” Jeff Marshall, a broker at industrial brokerage Kaplon Belo Affiliates in Long Island City, told Crain’s.
The incursion of retail into former industrial spaces has pinched inventory and lifted rental rates as well. When Beacon’s Closet, a vintage clothing store based in Williamsburg for 11 years, was priced out of its longtime space, the shop inked a deal for 7,500 square feet in a formerly industrial space at 74 Guernsey Street in Greenpoint. The clothier agreed to $40 per square foot in rent — twice what the property would have cost an industrial tenant, Crain’s said.
There is also the fact that as existing industrial space is converted to residential or retail, little new inventory is being added to the market. A 132,000-square-foot building at 145-68 228th Street in Springfield Gardens, Queens, one of few such newcomers, is already 100 percent leased, according to CoStar data cited by Crain’s. [Crain’s] — Julie Strickland