New York Boroughs Leading Development of New Class of Tall Warehouses

November 29, 2018

 

RXR Realty Readies City's Latest Multiple-Story Warehouse

New York City has long been known for its unique skyscrapers, from the iconic Empire State Building to the art deco Chrysler Building. Now it may become a hub for the tallest cutting-edge buildings of a different sort: warehouses. 

 

New York-based investor RXR Realty, which focuses on multifamily and office developments in the New York City region, plans a 770,000-square-foot multiple-story industrial property in the Maspeth neighborhood in the borough of Queens. RXR is working with national warehouse developer LBA Logistics on the project, called Grand Logistics Center, one of the largest of its kind in the most-populous U.S. city. 

 

Demand for industrial space is surging across the country as retailers need real estate where they can put goods into trucks to drive to the doorstep of consumers. Monday was the biggest online shopping day in U.S. history, with nearly $8 billion in sales, according to preliminary data from Adobe Analytics, which tracks e-commerce data from 80 of the nation's largest online retailers.

 

"It's clear that the next battle in the online retail world will be based on speed of delivery," said Neil Stern, senior partner at national retail analyst firm McMillan Doolittle. "We have rapidly moved from customer expectations of three- to five-day delivery to two-day delivery becoming the norm. Now, Amazon is pushing the boundary to focus on one-day delivery and even same-day."

 

To answer the last-mile distribution needs of New Yorkers, the five boroughs are attracting an increasing number of sophisticated industrial developments. Such endeavors incorporate multiple levels, higher floorplate weight loads and significantly more truck loading docks, features which are expected to speed up the shipping process.

 

According to CoStar Analytics, within the five boroughs there are five multiple-level industrial properties currently under construction for a total of 532,300 square feet. CoStar is tracking an additional eight proposed multiple-level industrial projects spanning 2.3 million square feet. 

Between 2015 and 2018, about 1.7 million square feet across 26 of these properties were built. That compares to just 389,856 square feet of this type of asset built between 2011 and 2014, according to CoStar analyst Edward Son, who calls the increase significant. But the borough of Queens leads New York City, with 18 existing industrial properties for a total of 854,578 square feet built since 2011. Twelve of those, totaling 628,302 square feet, were built since 2015. 

Market experts do not expect demand for this new class of industrial space to abate. Queens has gained national headlines for getting selected this month to house the online retailer Amazon’s upcoming headquarters in Long Island City , a project that will eventually add 25,000 more workers, stimulating apartment demand by an educated, well-paid and time-constrained population who may shop for some purchases online. 

 

Early condo sales data in Long Island City since Amazon's announcement "already shows tremendous buyer momentum,” finds a recently released special report by commercial real estate services firm Marcus & Millichap into the effects on the Long Island City housing market. “As Amazon ramps up hiring, demand for luxury apartments will increase in lockstep, supporting additional high-rise apartment towers throughout Long Island City, Astoria and northern Brooklyn.” 

 

While the vacancy rate of Class A apartments is at 7.9 percent, “the influx of numerous high-wage workers in future years will help allay concerns of overdevelopment,” the firm adds. Amazon said its employees will make an average of $150,000 annually, compared to the average Queens household income of $62,000.

 

Other big retailers are boosting their e-commerce capabilities. Last October, Walmart acquired Parcel , a New York City-based, same-day, last-mile delivery company. The big-box retailer cited online shoppers' growing demands for speed, flexibility and reliability of delivery as its impetus for the deal.

 

To meet these kinds of needs, most distribution centers around the country are near urban centers. But unlike other cities, New York is so large and densely populated that these local logistics hubs are planned to be spread within the city limits -- and will have multiple floors, reflecting the density of the city.

 

And given the state of e-commerce demand in the five boroughs, multiple-level industrial projects over the past year have popped up nearby John F. Kennedy International Airport in Queens, in South Brooklyn and in the Bronx .

 

But at 770,000 square feet and a planned height of three to four stories, RXR and LBA’s Grand Logistics Center is the largest proposed to date in Queens. According to CoStar data, it is one of four Queens projects in the proposal stage for a combined 1.4 million square feet. Three other multiple-level projects are in the construction stage, but they total 254,500 square feet. 

"The project is well-positioned to capture the increasing demand for well-located, modern logistics facilities near the large customer base tenants are trying to service,” said Leslie Lanne, managing director of real estate services firm Jones Lang LaSalle, who is working directly with LBA and RXR on the project. She said the Grand Logistics Center is intended to accommodate a variety of users, whether for last-mile, light industrial or traditional warehouse needs.

 

New York City has long been known for its unique skyscrapers, from the iconic Empire State Building to the art deco Chrysler Building. Now it may become a hub for the tallest cutting-edge buildings of a different sort: warehouses. 

New York-based investor RXR Realty, which focuses on multifamily and office developments in the New York City region, plans a 770,000-square-foot multiple-story industrial property in the Maspeth neighborhood in the borough of Queens. RXR is working with national warehouse developer LBA Logistics on the project, called Grand Logistics Center, one of the largest of its kind in the most-populous U.S. city. 

Demand for industrial space is surging across the country as retailers need real estate where they can put goods into trucks to drive to the doorstep of consumers. Monday was the biggest online shopping day in U.S. history, with nearly $8 billion in sales, according to preliminary data from Adobe Analytics, which tracks e-commerce data from 80 of the nation's largest online retailers.

"It's clear that the next battle in the online retail world will be based on speed of delivery," said Neil Stern, senior partner at national retail analyst firm McMillan Doolittle. "We have rapidly moved from customer expectations of three- to five-day delivery to two-day delivery becoming the norm. Now, Amazon is pushing the boundary to focus on one-day delivery and even same-day."

To answer the last-mile distribution needs of New Yorkers, the five boroughs are attracting an increasing number of sophisticated industrial developments. Such endeavors incorporate multiple levels, higher floorplate weight loads and significantly more truck loading docks, features which are expected to speed up the shipping process.

According to CoStar Analytics, within the five boroughs there are five multiple-level industrial properties currently under construction for a total of 532,300 square feet. CoStar is tracking an additional eight proposed multiple-level industrial projects spanning 2.3 million square feet. 

Between 2015 and 2018, about 1.7 million square feet across 26 of these properties were built. That compares to just 389,856 square feet of this type of asset built between 2011 and 2014, according to CoStar analyst Edward Son, who calls the increase significant. But the borough of Queens leads New York City, with 18 existing industrial properties for a total of 854,578 square feet built since 2011. Twelve of those, totaling 628,302 square feet, were built since 2015. 

Market experts do not expect demand for this new class of industrial space to abate. Queens has gained national headlines for getting selected this month to house the online retailer Amazon’s upcoming headquarters in Long Island City , a project that will eventually add 25,000 more workers, stimulating apartment demand by an educated, well-paid and time-constrained population who may shop for some purchases online. 

Early condo sales data in Long Island City since Amazon's announcement "already shows tremendous buyer momentum,” finds a recently released special report by commercial real estate services firm Marcus & Millichap into the effects on the Long Island City housing market. “As Amazon ramps up hiring, demand for luxury apartments will increase in lockstep, supporting additional high-rise apartment towers throughout Long Island City, Astoria and northern Brooklyn.” 

While the vacancy rate of Class A apartments is at 7.9 percent, “the influx of numerous high-wage workers in future years will help allay concerns of overdevelopment,” the firm adds. Amazon said its employees will make an average of $150,000 annually, compared to the average Queens household income of $62,000.

Other big retailers are boosting their e-commerce capabilities. Last October, Walmart acquired Parcel , a New York City-based, same-day, last-mile delivery company. The big-box retailer cited online shoppers' growing demands for speed, flexibility and reliability of delivery as its impetus for the deal.

To meet these kinds of needs, most distribution centers around the country are near urban centers. But unlike other cities, New York is so large and densely populated that these local logistics hubs are planned to be spread within the city limits -- and will have multiple floors, reflecting the density of the city.

And given the state of e-commerce demand in the five boroughs, multiple-level industrial projects over the past year have popped up nearby John F. Kennedy International Airport in Queens, in South Brooklyn and in the Bronx .

 

But at 770,000 square feet and a planned height of three to four stories, RXR and LBA’s Grand Logistics Center is the largest proposed to date in Queens. According to CoStar data, it is one of four Queens projects in the proposal stage for a combined 1.4 million square feet. Three other multiple-level projects are in the construction stage, but they total 254,500 square feet. 

"The project is well-positioned to capture the increasing demand for well-located, modern logistics facilities near the large customer base tenants are trying to service,” said Leslie Lanne, managing director of real estate services firm Jones Lang LaSalle, who is working directly with LBA and RXR on the project. She said the Grand Logistics Center is intended to accommodate a variety of users, whether for last-mile, light industrial or traditional warehouse needs.

 

The developers expect to demolish parts of the property early next year.

 

Rob Kossar, vice chairman of the Northeast Regional Industrial division of JLL, called the location ideal for a logistics facility providing distribution services throughout Queens, Brooklyn, Long Island City, the East Side of Manhattan, Lower Manhattan and the rest of the boroughs.  “Centrally located in Maspeth, Queens, this property offers a terrific opportunity for retailers, e-commerce and New York-centric companies looking to satisfy the expedited shipping demands of customers in the largest consumer base in the United States,” he said. 

 

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