Industrial buildings have become hot commodities in Queens, with real estate investors avidly acquiring these large footprint assets amid the meteoric rise of e-commerce. Whether it be the ample supply of last-mile logistics facilities and attractive pricing or its favorable zoning, few neighborhoods in the borough fit the bill for this type of property more than Maspeth.

(From left to right) By Derek Kornbluth, Director – Investment Sales Professional and Kristen Ostach, Analyst – Investment Research

The vanishing of brick-and-mortar retail stores and shopping malls throughout New York City has accelerated the need for strategically located industrial/warehouse space for storage and shipment by online retailers, restauranteurs, and import/export business owners. In Queens, demand for this asset class, which also encompasses self-storage buildings, helped buffer the impact of softening in the multifamily market caused by uncertainty ahead of New York’s new rent regulation laws that were enacted on June 15.

In the first half of 2019, Queens’ investment sales market saw 271 transactions, consisting of 330 properties for a total gross consideration of $2.12 billion, according to our company’s mid-year sales report, which can be found at http://arielpa.nyc/investor-relations/research-reports. Compared to the first half of 2018, transaction and property volume fell 16% and 21%, respectively, mirroring a trend seen throughout most of NYC.

Queens’ dollar volume, however, held steady year-over-year, while nearly every other NYC sub-market recorded a decline. This can largely be attributed to strong demand for industrial/warehouse/self-storage assets, with this property type in Queens registering the highest dollar, transaction and property volume since the first half of 2015. On top of that, these assets within Queens witnessed the highest dollar and transaction volume in the city. The borough’s 49 sales totaling $453 million in gross consideration marked a 36% leap in transaction volume and 176% surge in dollar volume compared to the first half of 2018. It is therefore no surprise that the average price per transaction in Queens jumped 51%, averaging $9.2 million per sale.

One of the most notable industrial transactions this year was 23-30 Borden Avenue in Long Island City, which was purchased by Innovo Property Group for $75 million and is being redeveloped into a last-mile logistics center. Amazon has shown interest in occupying this property once development is finished, according to news reports. Meanwhile, Blackstone, one of the country’s largest institutional investors, purchased a warehouse at 83-15 24th Avenue in East Elmhurst for $55.53 million in February.

Mad About Maspeth

Throughout NYC, shipping and logistics have become an enormously competitive business, so delivery centers that offer the capability of same day and soon-to-be 2-hour delivery have become extremely desirable. Maspeth has a surplus of large swaths of industrial real estate land and buildings that are competitively priced. With the neighborhood’s prime proximity to multiple boroughs, highways, bridges/tunnels, and airports, it is no surprise that Maspeth has become a hotbed for real estate investment.

Maspeth notched 9 transactions of industrial/warehouse/storage in the first half of 2019, the highest amount for this product type in Queens. At $104.96 million, this asset class also saw the highest dollar volume in the borough during the first six months of this year.

The neighborhood is merely 10 miles from JFK airport, 4.5 miles from LaGuardia airport, 5 miles from the Queens Midtown Tunnel, and is home to the Brooklyn-Queens Expressway/Long Island Expressway. This geographic advantage affords transporters swift access to nearly every region in the Tri-State area.

Attractive pricing has also been a key driver of demand. Astoria and Long Island City have historically been active neighborhoods, and predictably, the price per square foot for industrial/warehouse/self-storage assets run higher in these areas, at about $373-$423. However, an investor can acquire more square footage for much less in Maspeth, where these assets fetch around $309 per square foot.

Big institutional players have certainly taken heed. For example, Seagis Property Group, a leading owner of industrial real estate in South Florida, New Jersey, and the New York Metropolitan area, purchased 57-47 47th Street in Maspeth for $22.13 million, or $313 per square foot, in January. Turnbridge Equities added 58-95 Maurice Avenue to their last-mile portfolio, purchasing the building for $39.5 million, or $311 per square foot, in July.

At the same time, investors are also drawn to the large swaths of land in Maspeth that are in a designated Industrial Business Zone (IBZ). Put simply, a company located in an IBZ receives a tax credit of $1,000 per employee for up to $100,000, and the property is also protected from being residentially re-zoned.

At 49-00 Grand Avenue, an approximately 27,000 square foot M3-1 zoned industrial building that is being marketed by Ariel Property Advisors, an investor can enjoy this tax incentive as it is situated in an IBZ. Notable tenants in the immediate area of the property include multiple Fed-Ex locations, UPS Maspeth Customer Center, Manhattan Beer Distributors, and Peterbilt of New York City.

Due to the aforementioned factors, the outlook for Maspeth’s industrial properties is decisively bright. The neighborhood’s proximity to major airports and thoroughfares, competitive pricing, along with IBZ tax credits, will continue to make it a top-tier destination for investment. These attributes should definitively ensure solid asset appreciation for many years to come.