New York real estate is about more than luxury condos. Industrial buildings have also played a crucial role in this city’s infrastructure – and they continue to do so. In fact, industrial space has been in high demand due to the growth of e-commerce. Companies like Amazon, Apple and Walmart ship to thousands of Americans every day, and one way they manage this is by maintaining warehouses across the country which stock their most popular orders. When someone in, say, Newark, New Jersey orders the newest bestseller, Amazon already has it in stock at its warehouse in Carteret, New Jersey and can have it on the buyer’s doorstep sometimes in less than an hour. But when someone in Manhattan orders the newest bestseller, where is it shipped from? Likely Carteret as well. Whereas Apple and Walmart have storefronts to source deliveries, e-retailers like Amazon with no storefronts have trouble finding local industrial space to store and ship their merchandise.
The booming real estate market has led to the rezoning, repurposing and redevelopment of most of the city’s warehouses and manufacturing facilities. What space remains is in high demand, causing prices to soar. Sites in former industrial hubs like Long Island City and Greenpoint are now selling for exorbitant prices, if at all. Indeed, many owners of industrial space anticipate that a large development company will offer them millions of dollars for their property. As discussed previously in regard to Manhattan gas stations, this is not farfetched. One warehouse in Gowanus, totaling 13,447 square feet, recently sold to MacArthur Holdings for $9.5 million, or about $706 per square foot. Another real estate company, Sitex Group, recently purchased several warehouses in Red Hook for $110 million. Sitex plans to spend up to one $1 billion on industrial acquisitions over the next few years.
To find affordable industrial space, businesses are forced to expand their search area to the outer reaches of the city. In Brownsville, Brooklyn or Jamaica, Queens, rents are much cheaper, averaging about $16 per square foot. Another viable option for some businesses is to store products in New Jersey. Although current industrial space close to New York is expensive, there is plenty of room to build. New buildings close to New York are leasing for roughly $11 per square foot. Sitex is one of the most active developers in New Jersey, but other companies like Matrix Development Group and Bridge Development Partners are also investing in space along the Turnpike.
There is yet one more option for industrial space servicing New York: Staten Island. Prices in the Forgotten Borough average about $16 per square foot for cheaper locations, and roughly $25 to $30 per square foot at the higher end. Moreover, there is ample room to build. There is so much space, in fact, that NASCAR recently purchased a 671-acre site in Bloomfield on which it planned to build a racetrack. However, locals feared the noise it would generate, so the NASCAR plan was abandoned and the lot was put up for sale again. Soon thereafter, it was snatched up by Amazon. Amazon’s first large-scale fulfillment center in New York City will cover roughly one million square feet of a 3.5 million square-foot compound purchased by Matrix Development. The new warehouse is set to open in late August or September.