At the geographic and logistical center of the New York metropolitan area, The Bronx is a natural location for a thriving industrial asset base. Train lines and a working waterfront brought the industrial revolution to the south Bronx in the early 20th century and defined those neighborhoods. Until recently, the industrial real estate sector has been transitioning into residential development to meet New York City’s persistent housing shortage.
The Bronx lacks the open space that has made New Jersey and Long Island more attractive for sprawling warehouse and distribution centers that serve the metropolitan area. Space is scarce here to park a fleet of trucks and easily service 18-wheelers. Over the past ten years, The Bronx waterfront has gentrified and the industrial inventory has decreased by more than a million square feet.
Proximity to the epicenter has become more essential for some businesses in the post pandemic economy. Revolutionary multi-level warehouse developments are changing the industrial landscape as they rise vertically instead of horizontally. The explosion of online commerce has made last mile delivery more important, which has made The Bronx’s central location more valuable.
The Bronx Suits Amazon Well
No one is taking advantage of that central location more than the world’s dominant retailer. Most of the largest sale and lease transactions over the past year have involved Amazon. Their new fulfillment center on Barry Street is one of several new state of the art facilities constructed to meet the exacting specifications required by online mass retailers.
CBRE Investment Management developed three new Bronx fulfillment centers, which Amazon operates under long-term leases. Prologis owns the old ABC Carpet warehouse that furnished so many of our apartments, and is now leased to Amazon at $28/sf. The world’s richest retailer is paying top area rents for its highly efficient customized spaces.
Today’s class A facilities need ceiling heights to accommodate modern rack systems and enough space for semi-trucks and fleet parking. They also need workers, which are harder to find in the outskirts.
Although The Bronx is more expensive than the suburbs, land and leases are at a discount to other boroughs. The human capital and excellent infrastructure are once again attracting industrial operators to establish their businesses within the city limits.
Up Instead of Out
Reversing the long-term erosion of industrial space is mostly attributable to a couple of multi-level distribution centers that are changing the industrial landscape. 2505 Bruckner, and The Bronx Logistics Center are examples of New York industrial space rising up multiple levels with wide ramps to accommodate large trucks and parking decks for fleets. Think of a mall garage for trucks.
2505 Bruckner is adding over 700,000 sf of space this year at the confluence of the Cross Bronx, Bruckner and New England Expressways. Leases are commencing imminently in spaces as small as 50k sf. Pictured above, the larger Bronx Logistics Center has access to the CSX train line. It’s currently under construction on 14 acres less than two miles from the Hunts Point Food Distribution Center.
Both of these state of the art facilities will set new upper benchmarks for class A warehouse lease rates.
Those lease benchmarks have been rising at double digit annual rates for several quarters in The Bronx industrial sector. Growth rates like that have kept investors on the hunt with cap rates barely above 5% and prices per square foot growing around 20% annually in recent quarters.
But bargains can still be had.
There are plenty of opportunities to acquire Bronx Industrial space, even for those without Amazon’s balance sheet. Costar has almost 50 current sale listings ranging throughout the borough and class levels, at prices above and below our $300/sf industrial benchmark.
Smaller spaces in interior neighborhoods are asking higher prices per sf. Some are priced for their R7 zoning more than several thousand sf of warehouse space or an auto spray booth. A wide assortment of quality levels and sizes are available in the southern neighborhoods but get them quick before they’re converted to housing.
One example has six stories of 9,000 sf with some parking and loading areas. No drive-ins, but two loading docks and you get your stuff upstairs on a 5,000 lb freight elevator. Over 50k sf of traditional warehouse space with some modern amenities across the street from a new Amazon facility. Asking $22 million or about $400/sf, a fraction of the neighbor’s valuation.
On the lease side, you don’t have to pay $28/sf like Amazon to get quality space. Costar has over 100 industrial leases available in The Bronx at prices ranging from deep value around $10/sf to 10,000 sf available for $72/sf, appropriately on Tiffany Street. Lower rents can be had away from the south Bronx and the Bruckner. Several leases are available up north below $20, you can even get cold storage in Co-Op City for $17.
While a handful of marquee properties are driving The Bronx industrial sector, the attributes that attracted that investment are attracting more. Well-positioned Bronx industrial properties are in high demand with $427 million trading in the past 12 months, far exceeding the five-year annual average according to Costar data. Manufacturing, retailers and wholesalers accounted for 75% of 2nd quarter deals.
Local Law 97 mandating energy efficient upgrades to all buildings larger than 25,000 sf should drive more long term owners to sell into the vibrant market rather than invest in retrofitting. The near completion of the Bruckner Expressway construction project will remove another NY hassle from the south Bronx industrial market. That area is getting redefined with higher quality living and park spaces just a short walk to work, which should be a further demand driver.
If you’re looking for Bronx industrial space, please use the Contact link to learn more.
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