ABOVE: Home Depot recently purchased the Coca-Cola bottling plant on Borden Avenue in Maspeth.
BY MICHAEL DEVIGNE
As e-commerce continues its meteoric ascent, the demand for last-mile logistics facilities in New York City’s outer boroughs will follow. The e-commerce revolution (a.k.a. the Amazon Effect) is transforming the retail experience and the industrial real estate market.
How will this new on-demand paradigm impact NYC’s Industrial Business Zones (IBZ’s)? Is the existing building stock up to the task? How will other industrial subsectors contend with skyrocketing real estate values?
While the Maspeth Industrial Business Association (MIBA) advocates for the interests of the entire industrial community, we also recognize that market dynamics present opportunities and challenges across industrial subsectors.
A re-evaluation of city industrial policy should consider how market demand can incentivise building stock modernization, upgrade infrastructure, and attract well paying jobs, while also ensuring there are affordable industrial spaces across subsectors. In the past year Maspeth has been at the epicenter of the industrial real estate boom in NYC. These are only a few of the top industrial real estate transactions:
• Home Depot purchased a 202,000-square-foot warehouse from the Coca Cola Bottling Company on Borden Avenue for $63 million.
• UPS signed a lease for a 474,000-square-foot warehouse on 55th Avenue.
• LBA Realty purchased a 385-square-foot development site from Cascades for $72 million.
• American Realty Advisors is negotiating acquisition of a 350,000-square-foot FedEx warehouse on 57th Street for an estimated $350 million.
NYC’s active industrial real estate environment will likely result in other subsectors facing rising lease rates and greater competition for space. Multi-story warehouses, however, are attracting considerable attention as a remedy. Throughout the outer boroughs, we are seeing plans for new multi-story facilities as well as an uptick in sales of existing multi-story buildings.
Upzoning, coupled with use group reform, could also unlock the potential for additional industrial floor area construction without the threat of non-industrial encroachment common in New York City’s IBZ’s.
In many instances, commercial real estate developers have leveraged their use group entitlements to locate in M-zones to the detriment of the IBZ’s. Additional floor area ratio (FAR) in industrial zones and tighter use group regulations could ease competition for limited space among industrial sub-sectors in the IBZ’s.
Incentives, tax credits, and grants available through both the city and state will also contribute to shaping Maspeth’s industrial building stock. MIBA plays a role in helping businesses and property owners in Maspeth connect with incentives and grant opportunities such as ICAP, CEP and IDA benefits (to name few), which motivate owners to improve industrial properties and aim to unlock economic potential in the IBZ.
These tools offer industrial businesses some relief, but they are not without flaws. ICAP, for example, has been cited as being too blunt an instrument that can also be leveraged to develop office spaces and hotels in the IBZ’s.
The Economic Development Corporation (EDC) recently relaunched its Industrial Developer Fund (IDF), which aims to create, modernize, and/or preserve industrial real estate while also increasing the capacity of not-for-profit organizations to develop industrial properties.
The IDF was originally introduced in 2016, but was criticized by some as having overly stringent requirements that made it inaccessible to most organizations. The hope is that nonprofits can utilize the new and improved IDF to provide affordable spaces for manufacturing and other industrial subsectors despite escalating property values in the IBZ’s.
To maintain a diverse industrial economy, our city’s industrial policy will need to mediate the rise of e-commerce and its impacts on the real estate market. Already, smaller industrial firms in Maspeth and elsewhere are feeling the pressure from logistics behemoths.
Possible remedies run the gamut from architecture to zoning and land use, from tax benefits to public funding; all are part of the experiment. With so much on the line, the city needs to be proactive rather than reactive. Discussions about the exponential growth of the logistics sector and its impacts on industrial policy should begin now.