The industrial real estate market in New York City’s Outer Boroughs is a reflection of the economic pulse that touches businesses, workers, and neighborhoods. As unemployment fell to 4.9% by the end of Q2 2024, many felt a sense of optimism. Over 60,000 new private sector jobs brought growth in education and health services, helping families thrive and neighborhoods regain momentum. Yet, the story for the industrial sector, particularly in areas like construction, manufacturing, and trade, was less rosy. The loss of 14,700 jobs in these critical industries hit workers hard, raising concerns about the long-term health of the market. For communities tied to these jobs, it meant not just fewer employment opportunities but the ripple effects of reduced business for local stores, services, and suppliers.
Commercial real estate, especially industrial spaces, plays a key role in shaping how businesses and communities function. As demand for logistics hubs and warehouses soared, vacancy rates also rose to 4.5%, a signal that supply may be outpacing demand. The Bronx saw the steepest vacancy rise, while Brooklyn and Queens continued to attract mid-size tenants eager to secure space for last-mile delivery and e-commerce operations. For many businesses, securing the right space in the right location is crucial not only for their operations but for maintaining a competitive edge in a city constantly reinventing itself. These industrial leases aren’t just transactions; they’re the foundation upon which many businesses—large and small—build their future. The Outer Boroughs industrial market is thus both a lifeline and a battleground, reflecting the broader shifts in the city’s economic fabric.

Solid Industrial Leasing Growth
The Outer Boroughs industrial real estate market witnessed several positive developments during Q2 2024, particularly in leasing demand and overall market activity. Leasing activity remained robust, with year-to-date (YTD) absorption totaling 466,000 square feet (sf), driven by strong demand for industrial space. New leasing activity in Q2 reached 1.7 million square feet (msf), representing a 6.5% YOY increase, with mid-size tenants dominating the market. Brooklyn and Queens led the leasing activity, with the former accounting for 85.6% of the total deal volume.
Despite the challenges in industrial employment, the market recorded solid leasing growth, with 1.7 msf of new leasing activity reflecting heightened demand. This growth was primarily fueled by mid-size tenants seeking well-located industrial spaces to support last-mile delivery and logistics. Brooklyn and Queens emerged as hotbeds for leasing activity, with Brooklyn hosting six of the top ten deals, further solidifying its importance as a strategic industrial hub. Major deals included a confidential retailer securing a 79,340-sf lease at the Brooklyn Army Terminal, reflecting the borough’s continued desirability for logistics and warehousing operations, while new players like Piece of Cake Moving & Storage expanded their presence with a substantial lease in Long Island City.
Additionally, while overall asking rents dipped slightly by $0.23 per square foot (psf) to $28.21, the Bronx continued to experience upward momentum, with rental rates rising by $0.30 psf to $35.53. This rise in asking rents highlights the borough’s scarcity of industrial-zoned land, which has driven up demand and pricing, positioning it as the most expensive industrial submarket in the Outer Boroughs. The upward pressure on rents, particularly for fleet parking and logistics-oriented spaces, signals sustained demand for strategically located industrial assets, even as broader economic headwinds loom. The steady deal volume and rent growth in key boroughs reflect the market’s ability to adapt to shifting tenant needs, particularly those driven by e-commerce and urban logistics.

Rising Vacancy Rate
Despite strong demand, the Outer Boroughs industrial market faces several challenges that could hinder its future growth. The most prominent issue is the rising vacancy rate, which climbed to 4.5%, reflecting a market struggling to balance supply and demand. The increase in vacancy across all boroughs, particularly the Bronx, where it rose by 40 basis points (bps), indicates that new supply may be outpacing immediate tenant demand. The quarter’s net negative absorption also underscores the difficulty of absorbing newly constructed or available spaces at the pace necessary to maintain a balanced market. In particular, multi-story industrial facilities, which have been a focal point of recent development, remain partially or fully vacant, suggesting that tenants may be hesitant to commit to these higher-cost and logistically complex spaces.
The future of industrial development in the Outer Boroughs is also clouded by impending legislative changes aimed at restricting last-mile warehouse construction by 2025. This regulatory shift could disrupt the development pipeline and discourage developers from pursuing new projects. Although some may accelerate construction on approved sites, the prospect of limited future development poses a long-term challenge for a market already grappling with a shortage of industrial-zoned land. The potential constraints on future development, combined with existing vacancies and construction bottlenecks, could slow the market’s momentum if tenant demand falters or economic conditions worsen.

Navigating Complexities
Q2 2024 presented a mixed picture for the New York City Outer Boroughs industrial real estate market. On the one hand, the market demonstrated resilience with steady leasing demand, particularly from mid-size tenants, and robust absorption rates despite rising vacancy levels. The boroughs of Brooklyn and Queens maintained their position as prime industrial hubs, benefiting from their proximity to key transportation routes and urban centers. Meanwhile, the Bronx’s rising rents underscored the growing scarcity of industrial-zoned land, making it one of the most expensive submarkets for logistics operators.
On the other hand, challenges such as increasing vacancy rates, job losses in key industrial sectors, and potential regulatory changes loom large. The uncertainty surrounding the future of last-mile warehouse construction could hinder long-term growth. As the market moves forward, developers and tenants will need to navigate these complexities while adapting to evolving legislative and economic landscapes to sustain growth in the Outer Boroughs industrial sector.
Reference:
Q2 2024 Outer Boroughs Industrial MarketBeat, Cushman & Wakefield