By Dov Hertz
As the final numbers of 2024 are reported, it appears that 2024 will stand as a solid year for industrial logistics in the Northeast, with the market showing resiliency as it slowly begins to absorb new space and new players enter the market. Despite facing challenges such as rising vacancies and fluctuating demand, the market is poised for future growth, with potential restrictions on new development as increases in long-term demand continue.
Steady Growth in Rents and Leasing Activity
According to CBRE, the Northeast’s industrial and logistics market saw average asking rents rise 3.3% quarter-over-quarter and 6.3% year-over-year, reaching $15.74 per square foot by Q3 2024. This consistent increase underscores the region’s strong demand, even as the completion of 12.8 million square feet of new space pushed the vacancy rate to 6.4%. Notably, leasing activity surged to 17 million square feet during the quarter—a remarkable 40% increase compared to Q3 2023.
The bulk of leasing activity was driven by third-party logistics companies, while demand from traditional retail sectors remained moderate. Geographic trends also varied, with Hartford and New York City showing strength in rental growth, whereas markets like New Jersey, Pennsylvania, and Long Island remained stable. This regional disparity highlights how localized demand factors shape market performance.
A Pullback in Construction Amid Evolving Market Dynamics
The total quantity of industrial space under construction decreased, continuing a trend from peak construction in early 2022. As pre-leasing and vacancy have responded to the availability of new product, developers have pulled back from new projects. A slow recovery in leasing combined with a smaller construction pipeline will likely create an environment for progress in 2025 and 2026.
New York City’s Industrial Leasing Landscape
Meanwhile, in New York City’s outer boroughs, leasing volume topped 2 million square feet, higher than all of 2023, according to JLL. Smaller deals dominated the leasing market in 2023, and this continued in 2024. However, there was significantly more activity in larger deals. There was also an uptick of leasing in the Class A market after 2023, in which there were no deals signed.
As in the Northeast, volume in the construction pipeline in New York City has slowed, but newly completed projects and several new vacancies have increased overall vacancy. Notably, only five available new construction projects are scheduled for completion by the end of 2026. Potential regulations limiting industrial development in New York City could further constrain supply in the coming years, offering a strategic advantage to property owners with a long-term outlook.
The Broader East Coast Picture: Port Disruptions and Reshoring Trends
Zooming out to the East Coast, we once again focus on the possibility of disruption at the ports. While the region averted a labor strike in 2024 through a tentative agreement, unresolved issues—including automation—could trigger future union actions. Such disruptions would have significant ripple effects across the regional economy, emphasizing the critical role of seaports in industrial logistics.
At the same time, reshoring and nearshoring trends are reshaping trade dynamics. Factors such as tariffs on Chinese goods, tax incentives favoring domestic production, and lessons learned during the pandemic have accelerated this shift. By 2023, Mexico had overtaken China as the United States’ top source of imports, with the gap widening further in 2024. Canada, ranked third, is also playing a growing role in U.S. trade.
This pivot toward North American manufacturing is expected to drive demand for industrial space near ports and along key transportation corridors. In densely populated Northeastern markets like New Jersey, however, land availability is becoming a pressing concern. While Southern California faces less immediate land scarcity, legislative changes in the state could make industrial development more challenging, echoing some of the constraints seen in the Northeast.
Industrial Space and Supply Chain Resilience
Seaports will remain vital to global supply chains in coming years, continuing to anchor demand for industrial facilities in nearby markets. Despite the potential for labor or regulatory disruptions, supply chains today are more resilient than they were four years ago. This increased adaptability bodes well for the industrial sector as it navigates future challenges.
The past year proved to be a year of steady progress for industrial logistics in the Northeast. Rising rents, a pullback in construction, and shifting tenant preferences underscore a market in transition. Looking ahead, the region’s ability to balance supply and demand amid reshoring trends, regulatory changes, and port activity will define its trajectory in 2025 and beyond.