Tyler Culberson, NAI Platform
The New York Capital Region’s industrial market has experienced strong growth over the past 24 months, and promises a continued pattern of growth for the next 12 to 24 months. As the office market in the central business district struggles to right itself fueled by the State’s tenuous occupancy of numerous privately held properties, the industrial marketplace has flourished with extended commitments from existing users and the entrance of new users. Upstate New York is making a name for itself in the nanotech industry, and a great deal of national and international attention has been drawn to the region. In addition to activity driven by high-tech companies, national distribution and manufacturing groups have committed to the region or have focused their site searches in the Capital District.
The most significant job creation mechanism in the region has been the nanotech industry. Billions of private and public sector money has been invested since 2010 into Luther Forest Technology Campus in Malta, N.Y., as well as SUNY Polytechnic Institute (also known as the Colleges of Nanoscale Science and Engineering). These facilities have placed our region firmly on the international map and have transformed the appearance of New York’s Capital Region.
The strongest demand in the industrial sector has been for modern warehousing and service facilities ranging from 8,000 to 20,000 square feet. Due to the abundance of users, rental rates and purchase prices have continued to increase. There has also been a significant demand for facilities with the ability to accommodate outdoor storage. Recent activity includes:
- American Tire Distributors – In 2013, commenced construction on a 125,000-square-foot high-bay distribution facility in the heart of the Albany industrial market.
- Ferguson Enterprises – Received approvals for a 460,000-square-foot distribution facility with construction commencing in the fall of 2014. This facility will add 95 full-time jobs to the Coxsackie market just south of Albany.
- Old Dominion Freight – New cross-dock facility completed with a footprint of more than 40,000 square feet on a 13-acre parcel with 72 doors. This facility was constructed in Glenville Business and Technology Park in Glenville, N.Y.
- Long Island Pipe – In early 2014, the company leased 60,000 square feet of spec space from The Galesi Group in Green Island to further expand its existing presence in that market.
- Communications Test Design Inc. – In 2013, the company leased 130,000 square feet in the Glenville Business in Technology Park in a spec building completed by The Galesi Group. Recently, they committed to leasing an additional 21,000 square feet within that building.
As an owner of industrial properties in this region, The Galesi Group maintains its position as the largest developer in the market with more than 10 million square feet of industrial space. Galesi’s inventory includes a wide range of product, from older military depots to modern high-bay distribution facilities. Across the spectrum of property types, leasing activity has steadily increased, pushing rates upward.
Rates for new construction continue to be generally above $6.50 per square foot NNN for facilities below 50,000 square feet. Older buildings with some functional obsolescence are generally in the $2.50- to $4-per-square-foot range. Industrial land values remain very strong with pricing in primary, desirable locations ranging from $150,000 to $225,000 per acre for easily developable, shovel-ready parcels with infrastructure in place.
Local, regional, and national developers have struggled to find available lands with the appropriate zoning. However, the projects that have been completed have experienced above average absorption rates and remain favorable for the development community. Older industrial buildings continue to struggle with higher vacancy rates based on the operational inefficiencies. With a relatively low inventory of modern facilities, the demand for these modern facilities continues to grow.
— By Tyler Culberson, Commercial Specialist, NAI Platform. This article first appeared in the October 2014 issue of Northeast Real Estate Business magazine.