Despite New York City’s reputation as a dynamic industrial hub, the industrial market witnessed a notable cooling in leasing activity during Q4 2024. As economic uncertainty lingered and the demand for warehousing eased, leasing velocity across the boroughs dropped by 29.4% quarter-over-quarter. The slowdown, while significant, comes after several quarters of robust activity driven by e-commerce, logistics, and film production industries.
Net absorption also decelerated to 440,000 sq. ft., a marked decline from previous quarters. Still, several key sectors remained active in securing industrial space, including film production studios, third-party logistics (3PL) providers, and food manufacturing tenants, all of which are crucial players in New York City’s diverse industrial ecosystem.
Steady Development Pipeline with No New Starts or Deliveries
On the supply side, the development pipeline held steady at 3.7 million sq. ft., as no new projects broke ground or reached completion during the quarter. This consistency in the pipeline may offer some short-term stability, but the presence of unleased Class A logistics facilities signals potential oversupply concerns moving forward.
As more speculative Class A logistics developments remain vacant, there is an increasing likelihood that landlords will face pressure to offer incentives or reduce asking rents to attract tenants. This could impact overall market dynamics in the coming quarters, particularly if demand does not rebound as expected.
Rent Growth Defies Slower Leasing Activity
Despite the slowdown in leasing velocity, average asking rents rose by 4.9% quarter-over-quarter, bringing the total year-over-year increase to an impressive 12.4%. Class A logistics facilities, both existing and under construction, maintained steady rent levels throughout the quarter. However, on an annual basis, rents for this premium space surged by 22.9%, reflecting sustained demand for high-quality industrial assets in strategic locations.
The disparity between rising rents and waning demand underscores the uniqueness of the New York City industrial market, where limited land availability and high construction costs help buoy rents even during periods of slower leasing.
Key Takeaways from Q4 2024
- Leasing activity saw a sharp quarter-over-quarter decline, with demand for warehouse and storage space softening.
- Net absorption slowed to 440,000 sq. ft., highlighting reduced tenant expansion.
- No new construction starts or deliveries occurred, keeping the development pipeline at 3.7 million sq. ft.
- Average asking rents increased significantly, with a year-over-year rise of 12.4%, driven by stable demand for Class A logistics facilities.
- Potential oversupply concerns loom as unleased Class A space accounts for a significant portion of the current construction pipeline.
Market Outlook
While the Q4 slowdown signals a shift in market momentum, several factors could influence future performance. Continued demand from specialized industries such as film production and food manufacturing, coupled with New York City’s inherent constraints on new development, may help stabilize leasing activity in 2025. However, landlords of Class A logistics facilities may need to adjust strategies to address potential oversupply.
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