A surge in online shopping and limited modern warehouses equipped for e-commerce is pushing a cutting-edge development wave into New York City’s industrial market, already one of the largest in the United States.
Developers in Brooklyn, Queens and the Bronx are rushing to upgrade the city’s aging industrial building stock that's hamstrung by typically low ceilings and poor capacity to support heavy load weights. E-commerce companies also tend to demand space with enough room to accommodate warehouse robotics and multiple truck ports, which is rare in New York.
Goldman Sachs Asset Management and DH Property Holdings have started construction for their joint-venture development of 640 Columbia St., a three-story logistics facility in Brooklyn’s Red Hook neighborhood that the team says will allow for the fastest last-mile fulfillment possible in the nation's largest city.
Spanning 336,500 square feet and designed by architecture firm Ware Malcomb, the project is touted to be the tallest distribution center on the East Coast. Located on the Red Hook waterfront, 640 Columbia is within an hour’s drive of 13.5 million consumers and specifically designed to capitalize on demand for efficient warehouse space by e-commerce tenants, according to the joint venture.
It is expected to be open in the fourth quarter of 2020, said Joe Sumberg, managing director of Goldman Sachs’ Private Real Estate division.
“We are more bullish now about last-mile industrial in the New York City area than we were when we originally acquired the property,” Sumberg said. According to a recent industrial report by CoStar market analytics, the team signed a 99-year ground lease for the lots comprising the site valued at $280 million.
Red Hook evolved from a Dutch settlement into one of busiest ports in the country by the mid-1800s, according to the Waterfront Museum. About a hundred years later, the largely industrial neighborhood was considered one of the city’s most dangerous areas, where mobster Al Capone learned his trade. But in the past decade, it has transformed into a hip enclave marked by cafes, trendy bars, specialty stores, Citi shared bicycles and a massive new Ikea store.
In recent years, Red Hook’s proximity to Manhattan has led to mounting investment interest, with developers Thor Equities and Aecom undertaking some of the largest residential projects in southwest Brooklyn, CoStar analysts wrote in a report on the area.
Plans for the Red Hook site being developed by Goldman Sachs and DH feature 28 loading docks split evenly between the first and second floors. Those floors can accommodate 130-foot-long delivery trucks. On the first floor is a 162-space parking deck and direct freight elevator access to the third floor. On the first and second floors, ceiling heights are penciled in to reach 28 feet. The third floor is being designed with 18-foot ceilings.
“The first and second floors will likely be most attractive to last-mile distribution focused on reaching the end consumer within minutes. For the third floor, in addition to bulk distribution, the space could be desirable to tenants focused on high-touch product preparations, food commissary, pick and pack, maker space, or more creative tenants looking for showroom space in conjunction with or independent from the lower floors,” Sumberg said.
Race for Modern Distribution Space
As New York’s 9 million residents increasingly adopt new digital-shopping channels, retailers’ need to be close-in for speedy delivery has become more crucial. Commercial real estate investors are pouncing on the opportunity. Across the five boroughs, there are 10 industrial warehouse projects in the works, according to CoStar data. Nearly a handful of those rise multiple levels.
There is “insatiable demand for modern, ‘last-mile’ distribution space located in highly populated urban areas,” said HFF’s Rob Hinckley.
Brooklyn is home to another major warehouse development targeting e-commerce and third-party logistics tenants for last-mile distribution.
Wildflower is at work on Brooklyn Logistics Center, a two-building, 214,000-square-foot facility. The property, about 5 miles from John F. Kennedy International Airport, carries 32-foot ceiling heights. It’s being constructed on speculation, or without any tenants lined up. The project’s October delivery date is expected to make it the first modern warehouse coming on line in the city, according to commercial real estate services firm Cushman & Wakefield, which has the exclusive listing.
“The market is starved for quality product, especially in Brooklyn, which offers quick access to Manhattan. Only 9 percent of the industrial market in Brooklyn is Class A, a very low figure. With the way retail has been changing, the industrial market can’t keep up with demand for product supply to high-density residential populations,” said Rico Murtha, a director of leasing at Cushman & Wakefield. The average age of industrial stock in the boroughs is 70 years old, according to the firm’s data.
JULY 05, 2019|DIANA BELLEMAILPRINT
Industrial Wave Surges With Tallest East Coast Distribution Center
Goldman Sachs Venture Aims for Fastest Last-Mile Fulfillment
Construction is underway at a three-story industrial facility at 640 Columbia St. in Brooklyn, New York. Illustration: DH Property Holdings
Construction is underway at a three-story industrial facility at 640 Columbia St. in Brooklyn, New York. Illustration: DH Property Holdings
A surge in online shopping and limited modern warehouses equipped for e-commerce is pushing a cutting-edge development wave into New York City’s industrial market, already one of the largest in the United States.
Developers in Brooklyn, Queens and the Bronx are rushing to upgrade the city’s aging industrial building stock that's hamstrung by typically low ceilings and poor capacity to support heavy load weights. E-commerce companies also tend to demand space with enough room to accommodate warehouse robotics and multiple truck ports, which is rare in New York.
Goldman Sachs Asset Management and DH Property Holdings have started construction for their joint-venture development of 640 Columbia St., a three-story logistics facility in Brooklyn’s Red Hook neighborhood that the team says will allow for the fastest last-mile fulfillment possible in the nation's largest city.
Spanning 336,500 square feet and designed by architecture firm Ware Malcomb, the project is touted to be the tallest distribution center on the East Coast. Located on the Red Hook waterfront, 640 Columbia is within an hour’s drive of 13.5 million consumers and specifically designed to capitalize on demand for efficient warehouse space by e-commerce tenants, according to the joint venture.
It is expected to be open in the fourth quarter of 2020, said Joe Sumberg, managing director of Goldman Sachs’ Private Real Estate division.
“We are more bullish now about last-mile industrial in the New York City area than we were when we originally acquired the property,” Sumberg said. According to a recent industrial report by CoStar market analytics, the team signed a 99-year ground lease for the lots comprising the site valued at $280 million.
Red Hook evolved from a Dutch settlement into one of busiest ports in the country by the mid-1800s, according to the Waterfront Museum. About a hundred years later, the largely industrial neighborhood was considered one of the city’s most dangerous areas, where mobster Al Capone learned his trade. But in the past decade, it has transformed into a hip enclave marked by cafes, trendy bars, specialty stores, Citi shared bicycles and a massive new Ikea store.
In recent years, Red Hook’s proximity to Manhattan has led to mounting investment interest, with developers Thor Equities and Aecom undertaking some of the largest residential projects in southwest Brooklyn, CoStar analysts wrote in a report on the area.
Plans for the Red Hook site being developed by Goldman Sachs and DH feature 28 loading docks split evenly between the first and second floors. Those floors can accommodate 130-foot-long delivery trucks. On the first floor is a 162-space parking deck and direct freight elevator access to the third floor. On the first and second floors, ceiling heights are penciled in to reach 28 feet. The third floor is being designed with 18-foot ceilings.
“The first and second floors will likely be most attractive to last-mile distribution focused on reaching the end consumer within minutes. For the third floor, in addition to bulk distribution, the space could be desirable to tenants focused on high-touch product preparations, food commissary, pick and pack, maker space, or more creative tenants looking for showroom space in conjunction with or independent from the lower floors,” Sumberg said.
The floor plan for 640 Columbia St. is being designed by architecture firm Ware Malcomb. Illustration: DH Property Holdings
Race for Modern Distribution Space
As New York’s 9 million residents increasingly adopt new digital-shopping channels, retailers’ need to be close-in for speedy delivery has become more crucial. Commercial real estate investors are pouncing on the opportunity. Across the five boroughs, there are 10 industrial warehouse projects in the works, according to CoStar data. Nearly a handful of those rise multiple levels.
There is “insatiable demand for modern, ‘last-mile’ distribution space located in highly populated urban areas,” said HFF’s Rob Hinckley.
Brooklyn is home to another major warehouse development targeting e-commerce and third-party logistics tenants for last-mile distribution.
Wildflower is at work on Brooklyn Logistics Center, a two-building, 214,000-square-foot facility. The property, about 5 miles from John F. Kennedy International Airport, carries 32-foot ceiling heights. It’s being constructed on speculation, or without any tenants lined up. The project’s October delivery date is expected to make it the first modern warehouse coming on line in the city, according to commercial real estate services firm Cushman & Wakefield, which has the exclusive listing.
“The market is starved for quality product, especially in Brooklyn, which offers quick access to Manhattan. Only 9 percent of the industrial market in Brooklyn is Class A, a very low figure. With the way retail has been changing, the industrial market can’t keep up with demand for product supply to high-density residential populations,” said Rico Murtha, a director of leasing at Cushman & Wakefield. The average age of industrial stock in the boroughs is 70 years old, according to the firm’s data.
Wildflower's Brooklyn Logistics Center project features mirror-image buildings. Illustration: Wildflower
“Multistory developments are swinging for the fences, looking for e-commerce/tech-type companies to take large 100,000-square-foot-plus blocks of space. What is so unique about this site is that it is in line with the traditional industrial market product, but it is brand-new. It is a traditional type of warehouse with off-street parking and loading that doesn’t exist in the outer boroughs. The scale of 200,000 square feet is also not available and makes it stand out, but even more so because the buildings are designed to be flexible and can be divided into spaces as small as 40,000 square feet,” said Cushman & Wakefield Managing Director Frank Liggio, who is working with Rico on leasing.
Meanwhile in Queens, a 300,000-square-foot, three-level logistics warehouse is rising from a three-acre plot also near JFK airport. Joint-venture partners Triangle Equities, L&B Realty Partners and Township Capital are building the project, dubbed Terminal Logistics Center, at 130-24 S. Conduit Ave., and expect it to be ready for tenants in 2020.
“We’ve wanted to invest in this type of venture for some time because of what we saw happening in New York City," said Josh Weingarten, director of capital markets at Triangle. "For years, New York City industrial in the boroughs has been rezoned to residential. The remaining industrial product is very old; it doesn’t have the features a modern logistics occupier wants," he said.
Possible tenants for the property include third-party logistics firms, business-to-business freight forwarders that move cargo through JFK to manufacturers, and businesses that support JFK, according to Weingarten.
"There is an incredible lack of supply of warehouse/fulfillment space while every year more retail is happening through e-commerce. So it’s this perfect storm," he said.
Also in Queens, New York-based landlord RXR Realty is stepping up its e-commerce pursuits with Grand Logistics Center, a 770,000-square-foot industrial site that will stand three to four stories as one of the largest warehouses under construction in the city.
RXR is working with national warehouse developer LBA Logistics on the project, which seeks to appeal to retailers’ need for supply-chain speed – it will encompass 84 doors, 32 truck stalls, staging areas, office space and secure parking lots. Trucks will be able to load directly from the first, second and third floors.
And in the Bronx, commercial real estate investment into new industrial product has been snowballing since 2018, as big names such as financier Square Mile Capital, Innovo and Prologis pursue development of modern, multistory industrial properties that brokers expect to achieve high-water marks for rent in the area. Most recently, Square Mile Capital made another industrial purchase, teaming with Himmel + Meringoff Properties to purchase a low-rise Bronx industrial property at 1601 Bronxdale Ave. for $89 million.
The partners will modernize the space as part of a new acquisition program targeting mixed-use and industrial properties. The partnership “intends to take advantage of increased local market demand for distribution facilities,” Square Mile Capital Chief Executive Craig Solomon said in a statement.
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