NYC Industrial Sector Closed Out 2024 With Surge in Leasing Activity

The industrial market in New York City had a standout year in 2024, closely mirroring the activity levels seen during the early days of the pandemic. However, signs indicate the market is approaching its limits.

Leasing Activity and Market Trends

In 2024, over 2.8 million square feet of space was leased in the city's outer boroughs. This marked the second-busiest year on record, with leasing activity falling short of the 2020 peak, which saw 5.6 million square feet leased. Notably, tenants were especially interested in spaces ranging from 50,000 to 100,000 square feet, with 18 leases signed in this range - a significant increase from just four leases during the previous period.

Signs of Market Tightening

Despite strong leasing numbers, the market showed signs of slowing in the latter part of the year. In the final quarter, leasing activity dropped to 400,000 square feet, a 36.8 percent decline from the two-year average. This decrease, combined with an increase in average asking rents, which reached $30.39 per square foot, suggests that the market is becoming more compressed. Key industries, such as film production, food manufacturing, and logistics, are vying for an increasingly limited supply of space, driving up rents.

Limited Supply and Future Prospects

Even though developers delivered 2.7 million square feet of space in 2024, the vacancy rate remained low at 4.3 percent. The pipeline for new development is also limited, with only five major projects in progress, two of which are expected to be completed by next year. As a result, space will remain scarce, which is advantageous for investors and landlords but presents challenges for tenants.

Potential Future Developments

Looking ahead, a significant development opportunity may arise from Prologis's recent acquisition of 440 Kingsland Avenue on the Greenpoint waterfront for $122 million. While the future use of the site is still uncertain, it could potentially be developed into a logistics facility or vehicle storage hub, adding to the already limited industrial space in the city.