Supply Shortage is What’s Keeping NYC’s Industrial Leasing Low

By: Hellen Zaboulani

New York’s commercial real estate recorded lackluster leasing levels for 2021, but the cause is now revealed to be low supply—not low demand, as previously thought.

As reported by Crain’s NY, in the fourth quarter of 2021, companies leased roughly 712,000 square feet of industrial space, down more than 17.6 percent quarter over quarter, as per a CBRE report. Last year, there was total leasing activity of 3 million square feet, down 58 percent compared to 2020, when the industrial sector was faring best from all real estate as the pandemic ravaged the Big Apple.

Net absorption was about 1.4 million square feet for the year, meaning that companies leased more industrial space than what was being added to the market. For industrial space the availability rate was just 7.3 percent, which is below the levels recorded in the third and fourth quarters of 2020, as per the report.

The CBRE report notes that large companies looking for quality industrial space are experiencing a shortage, and this was the main reason for the slow activity during the quarter. Currently about 5.6 million square feet of Class A industrial space is under construction, and close to 30 percent of what’s available is already leased out. Asking rents range from $25 to $39 per square foot, showing that demand is not bad after all.

There were 43 leases closed during the three months ending December 31, 2021. The biggest deal was ReadySpaces, which supplies warehouses and flexible spaces to small business, who took on 90,000 square feet at 59-10 Decatur St. in Flushing. There were 16 deals for around 250,000 square feet in Brooklyn, 18 deals for approximately 350,000 square feet in Queens, six deals for around 76,000 square feet on Staten Island, and three deals for roughly 32,000 square feet in the Bronx.

As per Crain’s, two new industrial properties were opened up during the fourth quarter. Namely, at 55 Bay St. in Red Hook, Brooklyn, which is already fully leased; and 1215 Spofford Ave. in Hunts Point in the Bronx, which still has availability.

The fourth quarter also saw 14 investment sales valued at roughly $910 million, spanning some 830,000 square feet. The average asking sales price remained unchanged for the quarter, at around $325 per square foot.