Bronx Industrial Boom Shows No Sign Of Slowing

The Bronx’s industrial market has been on the upswing for some time now, and with explosive e-commerce demand and widespread skittishness around multifamily, its rise seems to be accelerating. 

Amid a declining overall investment sales market, the Bronx's industrial, warehouse and storage asset market in New York City reached a 10-year high in 2019, according to Ariel Property Advisors. There were some 35 transactions across $440M, per the brokerage. That figure represents a 130% increase from 2018 and a 107% jump over 2017.

Sources pointed to continued strong interest from institutional investors in the asset class, buyers’ retraction from the multifamily sector and the ongoing need to get goods to consumers quickly. They said all are needs the Bronx can serve. 

"When people kind of gathered what was happening with the multifamily rent regulations, they said, 'you know what — instead of looking at multifamily, where else is there value add?’” Ariel investment sales broker Jason Gold said. “Commercial, industrial, warehouse and development sites — there's still money to be made.”

There is no shortage of big names snapping up industrial property in the area. Innovo Property Group picked up 511 Barry St., a 140K SF warehouse in Hunts Point, for $54M in December. MRP Realty sold a 116K SF industrial property at 1300 Viele Ave., which is leased to Amazon, for $70M, or more than $600 per SF last year.

Turnbridge Equities paid $56.2M for an industrial development site in Port Morris, and Blackstone‚ fresh off its $19B purchase of GLP’s U.S. industrial portfolio, snapped up a warehouse in the borough last year, too. Goldman Sachs Asset Management and Blumenfeld Development Group have also teamed up to buy assets in the borough. 

“You have institutional investors that have a game plan moving forward… [And] rolling into 2020, it hasn't slowed down," Gold said.

Himmel + Meringoff Properties Director of Strategic Acquisitions Andrea Himmel said one of the Bronx's big attractions is its strong infrastructure. Her firm joined with Square Mile Capital Management in May last year to pay $89M for a mixed-use industrial site at 1601 Bronxdale Ave., and Himmel said the company will continue to look for industrial properties in the area.

"Maspeth, Queens, is considered the heartland because you can access Long Island and Brooklyn and Manhattan … Bronx is considered the next best because you can also access the Northeast like Boston and Connecticut,” she said. "One thing that we're seeing in warehousing is rather than large retailers taking a million square foot warehouses over and over again … retailers [are] taking smaller, 100K SF warehouses and making them satellite warehouses,” she said.

Warehouse space is in such high demand in the Bronx, Cushman & Wakefield broker Jonathan Squires said, that properties are sometimes leased up, or at least have a term sheet out, before they are sold. In the past, he said, owner-occupiers have been able to beat out investors for industrial properties in the Bronx, but that is no longer the case.

"Even though there's usually a premium that the users would pay, investors are willing to pay so much more than they typically would, and accept a lower cap rate that premium is shrinking and, at times, investors are willing to pay more than users,” he said. “In my 20 years being in the Bronx and seeing industrial property, users have always been able to beat out investors on vacant industrial.”

Investors typically interested in multifamily are now chasing industrial assets in the Bronx. The infrastructure, location and density of labor are all big selling points. too. Last year, for example, Gov. Andrew Cuomo announced plans to build four new Metro-North stations in the borough.

“I’ve always pointed out [the Bronx] is the only borough that is on the mainland of the United States, every other borough is on an island," Squires said. "You also have [Interstate] 95 running through the Bronx, you've got rail links that are coming in and you also have the benefit of a number of bridges that don't have tolls that get you into Manhattan. And businesses can definitely utilize that as a cost-saving measure.”

The growth of industrial assets in the Bronx is just one piece of the puzzle of the entire region’s industrial market, said Newmark Knight Frank Research Manager Mark Russo, which is changing with the explosion of e-commerce. In the past, the main distribution hubs were in northern and central New Jersey — but demand has pushed tenants both into the city and farther out around the region.

"[Consumer demands is] making the market not only push outward, but inward," Russo said. "This is evolving really into a new super-regional market that extends from Albany and central Pennsylvania to the outer boroughs of New York City."

While rents are higher in the Bronx than Pennsylvania or upstate, he said, it may have an advantage when it comes to hiring.

“In terms of labor generally, the inner-ring markets are going to have an easier time …. So it's good for [warehouse tenants] to be in an area where they can hire temporary help very easily," he said. "You can do that in the Bronx.”