What Slowdown? Industrial Market Surges In NYC Outer Boroughs

While slowing leasing activity and higher interest rates have provided a bleak outlook for some classes of commercial real estate, the New York City industrial scene is proving to be a welcome bright spot in the market.

Industrial leasing in NYC hit a five-year high with more than 1M SF of volume in the first quarter, surpassing the pandemic-era boom from 2020 to 2021. This trend is most noticeable in the outer boroughs of Brooklyn and Queens, which saw 83% growth from 2023. 

One of the companies capitalizing on this boom is NYC-based real estate development and investment firm Turnbridge Equities, which acquired its 807 Bank Street site in 2021.

Turnbridge Equities Managing Principal Ryan Nelson said the property is one of only two distribution warehouses on the East Coast that is LEED Platinum, the U.S. Green Building Council's highest sustainability rating. The company turned the property into a 172K SF last-mile industrial warehouse in the Canarsie submarket in Brooklyn.

“The continuation of a decades-long trend in the decline in industrially zoned land in the city makes development opportunities for true Class-A products increasingly scarce,” he said. “Additionally, a newly contemplated special permit process by the city of New York poses a new potential challenge for investors.”

Turnbridge Equities believes the story of 807 Bank Street provides a great data point for the city as it debates the implementation of a new special permit process for last-mile facilities as part of Mayor Eric Adams’ City of Yes proposal.

“If the new special permit process was in place when we were deciding whether or not to pursue the development of 807 Bank Street, we wouldn't have been able to convince investors or lenders to take the risk of building on spec, nor would we want to take the risk ourselves,” Nelson said. “The city would have missed out on hundreds of new jobs during construction and with tenant operations today. Instead, there would still be two dilapidated warehouses requiring environmental remediation that were built in the 1930s and 1940s.”

Turnbridge Equities discovered 807 Bank Street through a long-term relationship with a legacy NYC industrial brokerage, and the property was bought off-market, Nelson said. The property was originally two adjacent lots totaling 90K SF with two different owners. It features 80K SF of warehouse space and 92K SF of parking on the warehouse rooftop, in addition to housing and a 670-kilowatt rooftop solar carport.

Nelson said Turnbridge was attracted to the immediate submarket, which already houses the New York Department of Sanitation, UPS, FedEx and Amazon. Properties like 807 Bank Street provide new space for new-to-market and legacy tenants, many of which are looking to relocate and modernize. 

Construction of 807 Bank Street began in mid-2022, and while in an established industrial node of the city, it still presented a set of challenges the project had to overcome. Nelson said one of the large challenges was having to “coordinate intensely” with the New York City Metropolitan Transportation Authority. 

“Given we’re across the street from an above-ground portion of Brooklyn’s L line, we were required to manage a significant coordination effort, including vibration monitoring, alteration of our ground improvement specifications to minimize vibrations, in addition to other construction logistics, including managing crane picks,” Nelson said.

The project received a temporary certificate of occupancy in May from the NYC Department of Buildings. While the project was 65% preleased by that date to two tenants, it signed its third tenant in July and is now 100% leased. 

The last tenant is Charlotte-based waste container manufacturer Otto Environmental Systems, which won a 10-year contract with DSNY as the exclusive provider of refuse, recycling and organics bins for all residents in one-to-nine-unit buildings.

Nelson said he believes Otto Environmental chose 807 Bank Street because it met all of the company’s requirements, including convenient highway access and a location near arterial streets to facilitate last-mile deliveries. 

“We were able to do what a lot of landlords are reluctant to do, which was move very quickly on a lease that met Otto’s requirement of needing to secure a location quickly to help meet their ambitious goals of its DSNY rollout,” he said. 

In addition to the space it provides to its private tenants, Nelson said the project has served the public in numerous ways, including sustainable features such as a vast solar array on the roof and a massive visual improvement to the neighborhood, including redone sidewalks. Also, it features repaved streets and crosswalk improvements in coordination with the New York City Department of Transportation and environmental remediation of two dilapidated and polluted projects.

“The construction itself was a major source of employment for construction workers, most of whom are local NYC and Long Island residents,” Nelson said. “By bringing three new tenants to the property, we’re supporting Brooklyn’s and NYC’s local economy for long-term, good-paying jobs in a state-of-the-art facility.”

This article was produced in collaboration between Studio B and Turnbridge Equities. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.