'I'll Sell For The Right Price': Why The South Bronx Remains An Industrial Powerhouse
With news Friday of yet another market rate condo project coming to the South Bronx, buzz for residential development in the area is not getting any quieter. But there’s another asset class that’s heating up there too.
Simone Development president Joseph Simone says the increased demand for industrial space in the area’s got at least as much to do with what’s happening in Brooklyn and Queens as it does with big developers like Chetrit Group and Somerset Partners building ground-up residential projects in the neighborhood. That's Joseph on the right with Hutch Management president Joseph Kelleher at the topping off of the Montefiore Ambulatory Surgery Center in the Bronx.
Industrial inventory’s being squeezed all over the outer boroughs, as space goes to conversions for office and residential use, and as land trades for ground-up sites. Joseph’s firm owns several industrial properties in the South Bronx and last year sold a 120k SF building to Silvercup Studios. He says the loss of industrial space all across the city has made the South Bronx, which sits a hop, skip and a jump from Manhattan, Queens and Westchester, more relevant than ever for warehouse space.
But there’s another driver, too, he says: as online shopping has become more of a norm, companies need warehouse space that’s accessible to large pools of customers. Space might be cheaper in New Jersey, but do you really want to deal with the Lincoln Tunnel every day?
Case in point: FreshDirect is preparing to move its HQ and distribution center from Long Island City to the South Bronx, and WB Mason signed up for a 173k SF for a distribution center in the Castle Hill section last year.
Elias Everett, a broker with Friedland Realty Advisors, which specializes in industrial space in the Bronx and Westchester, says warehouse rents over the past year and a half or so help tell the story.
He says in that time they’ve gone from typically around $12/SF to now over $16/SF. “As of now there’s barely any warehouse available,” he says. “I could make so many deals here but I don’t have the inventory.”
But, as he points out, rents in the area are still well below where they are in places like Long Island City, where asks are often in the upper $20s.
Some of the South Bronx's industrial inventory is disappearing, as owners begin to sell to developers for ground-up and conversion projects in some parts of the area.
But Simone has about 150k SF of new industrial space in the pipeline in the South Bronx, with two projects in the works, a repositioning of an old 75k SF industrial building, and a 70k SF ground-up project.
Even those playing a role in the area’s residential boom don’t see its industrial roots being pulled up any time soon.
“I think the area will maintain its mixed-use character,” says Eastern Consolidated’s Martn Ezratty, who represented Somerset Partners when it bought an 805k BSF site at 101 Lincoln Ave for $32M. Somerset’s building a residential complex that will have over 1,000 units in a JV with the Chetrit Group.
“You hear a lot of: ‘I’ll sell for the right price’ [from industrial landlords in the South Bronx],” Marty says, but he points out that most of the landlords he’s approached in the area own mom-and-pop industrial businesses that have been in operation for generations and aren’t yet seeing the chance of a payoff big enough to justify cashing in and walking away or moving to another area altogether.
That’s even with pricing on warehouse buildings that Joseph says he’s seen roughly triple in the last decade or so, from around $100/SF to closer to $300/SF in some cases.
With pricing moving like that, Joseph says a rezoning will eventually be needed to help the area maintain its mixed-use character. He points to the 2001 rezoning in Long Island City that paved the way for that neighborhood’s waterfront residential development and also helped it preserve some of its industrial space. “I see the Bronx as the new Queens,” he says.