Brooklyn\u2019s industrial market remains singular.\u00a0<\/p>\n
Limited by the large capital expenditures needed to upgrade or add ground-up space, constantly impacted by a spree of conversion projects, and uniquely multi-use due to the borough\u2019s varied role as a growing population center, industrial crossroads and Manhattan neighbor, the Brooklyn market is unlike the nation\u2019s other warehouse spheres.<\/p>\n
SEE ALSO: How Fulcrum Lending\u2019s Products Are Optimized For Today\u2019s High Rate Environment<\/a><\/p>\n But it still gets pushed and pulled by a national industrial market that, at roughly 8 percent vacancy, continues to level out. After the last five years of market dynamics \u2014 including rocketing growth fueled in large part by the pandemic-driven e-commerce boom and an ensuing supply glut, never mind a year of trade wars and tariff uncertainties \u2014 Brooklyn industrial players are adopting a new normal and have started making more long-term decisions.\u00a0<\/p>\n \u201cI think the market is starting to bounce back pretty meaningfully,\u201d said Zach McHugh, principal of Sitex Group<\/a>, a vertically integrated real estate private equity firm focused on industrial, including a sizable Brooklyn portfolio.\u00a0<\/p>\n From a deal perspective, it\u2019s been a rough few years for the borough, according to year-end data from brokerage Matthews<\/a>. There were 101 deals in 2022, but only 65 last year. Even with the caveat that Brooklyn is a smaller market with relatively small deal sizes, the last few years have seen a retraction. Matthews research found total deal volume in 2025 was $235 million, a 76 percent drop from 2024. And the average deal size in 2025 was $3.5 million, down sharply from $9.5 million in 2024 and $8.5 million in 2023.<\/p>\n \u201cBrooklyn industrial trades are more like residential than investment properties because you\u2019re more often than not dealing with single users,\u201d said Bobby Lawrence, a vice president at brokerage Matthews. \u201cAnd, with investors underwriting longer lease-up timelines as vacancies continue to increase, they\u2019re being more conservative projecting market rent. The gap between what investors want to pay and what users want to pay is massive.\u201d\u00a0<\/p>\n JLL<\/a> estimates the current industrial vacancy rate in Brooklyn hovers right around 2.9 percent.\u00a0<\/p>\n But Brooklyn\u2019s inventory, and its many points of differentiation, actually make it a much better performer than those numbers indicate. Out of the roughly 155 million-square-foot industrial market spread between Brooklyn, Queens and the Bronx, Brooklyn takes the lion\u2019s share of the square footage.\u00a0<\/p>\n The long-term fundamentals in Brooklyn \u2014 high transport costs make the borough\u2019s ability to store goods close to a lot of affluent consumers very desirable \u2014 remain strong. The pipeline for new supply is functionally nonexistent, since the costs of land, rebuilding and upgrading make new development nearly impossible, and a significant slice of the operational warehouses remain mom-and-pop-operated spaces of around 50,000 square feet (between 15 and 20 percent of the Brooklyn industrial market is institutionally owned, according to Helen Paul, an executive director at Cushman & Wakefield<\/a>). The challenge of finding space goes double for industrial outdoor storage \u2014 try finding significant vacant surface lots for large-scale parking.\u00a0<\/p>\n \u201cIt\u2019s probably one of the most steady Eddie, kind of boring, vanilla markets that we have, but in a good way,\u201d said JLL Vice Chairman Leslie Lanne. \u201dI wish all my markets were like that.\u201d<\/p>\n That steadiness is due in no small part to the fact that the\u00a0 vast majority of the market remains outdated and inefficient, functionally obsolete or riddled with derelict ownership. The situation serves to reduce the available space and increase rents for functional space, which McHugh defines as some dedicated parking, off-street loading and good ceiling heights with limited columns. According to Colliers data from mid-2025, asking rents for outer borough industrial stood at around $27<\/a> a square foot, slightly down from a record high in 2024.<\/p>\n Functional industrial buildings in Brooklyn are simply durable, with very sticky rents, said Price Booker, chief investment officer at Realterm, an owner specializing in transportation and other infrastructure assets.\u00a0<\/p>\n \u201cGoing into 2026, the borough continues to have chronic undersupply of functional inventory,\u201d said Paul. \u201cFrom where we sit, having a lot of agency product and big occupier requirements in the market, we\u2019re continuing to see this trend of really strong activity in the 25,000- to 75,000-square-foot size tranche.\u201d<\/p>\n The types of users also tend to stand out. Brooklyn\u2019s warehouses serve as the \u201cinvisible backbone of the city,\u201d said Paul.\u00a0<\/p>\n Major users include food, grocery and ghost kitchens, building supply vendors, and construction companies. New York City\u2019s hundreds of millions of square feet of residential and commercial space needs constant service, as do its more than 8 million people. Last-mile delivery sites can be in demand, too. In the fourth quarter of 2024, for instance, three tenants each signed last-mile deals of at least $100 million, including $157 million for an Amazon-leased space in Red Hook<\/a>. But tenants who aren\u2019t service-oriented can often find space in other boroughs or in New Jersey.\u00a0<\/p>\n Factor in the growth of conversions for uses as diverse as movie studios, concert venues, even pickleball and pet centers, and there\u2019s constant demand and upward rent pressure on surviving, suitable warehouse space. There\u2019s even a small but growing utilization of space for energy needs, such as lay-down space for wind-powered energy firms.\u00a0<\/p>\n Higher and better uses often pencil out in Brooklyn \u2014 just look at the transformation of the East River waterfront \u2014 and rezonings also serve to shrink supply and artificially inflate rents. The apartment boom in post-industrial Gowanus has been just the latest example of the forces that transformed neighborhoods such as Williamsburg and Greenpoint, and new rezoning along Atlantic Avenue near the Barclays Center will pull more warehouses from the market.\u00a0<\/p>\n \u201cI think the fundamentals in Brooklyn are as good as any market in the country in terms of barriers to entry,\u201d said Realterm\u2019s Booker.<\/p>\n This shrinking supply in Brooklyn comes at a time when the larger industrial market isn\u2019t crashing or exploding, but merely stagnant. With sublease space on the market finally decreasing and absorption keeping up with new supply, the national market isn\u2019t rebounding, it\u2019s resetting, said Gregg Healy, an executive vice president and head of Savills Industrial Services.<\/p>\n