Amazon Rumored to Be Looking at Industry City for New Logistics Facility
August 5, 2019
Rumor has it that Amazon is eyeing Industry City as the site of its next logistics facility.
Skeptics argue that the story could be a ploy to negotiate a better deal for a new warehouse in Sunset Park, Brooklyn, when their lease expires at Liberty View Industrial Plaza,another industrial complex next door. Still, there’s no question that Amazon wants a big distribution facility in Brooklyn.
Amazon might be looking to lease up to 1 million square feet in Industry City, according to Crain’s New York Business, which first reported on the rumor yesterday. Bloomberg then followed up with a similar story, citing a “person with knowledge of the matter.”
With a population of 2.7 million, it makes sense for Amazon to build more fulfillment centers in the borough, according to Marcus & Millichap broker Jakub Nowak. Going forward, he believes that Amazon will expand its logistics centers to better serve clientele in Brooklyn without having to travel from Queens or Staten Island. Amazon has been operating a 900,000-square-foot distribution center on the western shore of Staten Island, and the e-commerce giant recently leased 120,000 square feet of warehouse space in the Hunts Point section of the South Bronx, as Commercial Observer reported.
And Amazon has already had a presence in Sunset Park for a few years. The tech company signed a seven-year lease in 2015 for a 50,000-square-foot space at Liberty View, which is located at 850 Third Avenue between 30th and 32nd Streets. The retail and industrial complex owned by Salamar Properties is right next to Industry City, and it’s possible that Amazon wants generate competitive offers for a larger or newer space nearby, Brownstoner speculated.
As for Amazon’s Liberty View location, “I don’t think that’s really comparable,” Nowak said, noting that it’s a much smaller facility. Most Brooklyn distribution centers on the market are a few hundred-thousand square feet at most, he said.
“I think it’s very likely — with last mile and e-commerce becoming as big as a business as it is today — that growth requires larger and larger facilities,” Nowak said.
The e-retailer could also be looking at the Brooklyn Army Terminal (BAT), a series of city-owned warehouses just south of Industry City that have plenty of vacancy and an empty lot that could accommodate new warehouse construction.
“Where can they actually go that can provide the scale of property that they need?” asked Dan Marks, a partner and industrial investment sales broker at TerraCRG. “Most of the places are out in eastern Brooklyn, East New York, Gateway — away from where a lot of people live — and the other options are Industry City and the Army Terminal. The Army Terminal has a big campus with large parking lot areas, so if the city wanted to unlock additional [floor area ratio], there it could happen.”
Marks also pointed to Dov Hertz’s planned multi-story warehouse property in Red Hook as another possibility.
The BAT, for its part, declined to comment on the Amazon rumors. But a spokeswoman for the New York City Economic Development Corporation, which manages the former military complex, said that “there is a large parking lot [at BAT] that the City seeks to build an urban distribution center on that meets our criteria.”
Industry City’s reaction was similar. “While it’s clear that a number of companies are looking to satisfy their ‘last mile’ needs in Brooklyn, we decline to comment on any specific negotiations that might be underway,” a spokeswoman for 35-acre commercial project said in a statement.
A source familiar with Industry City pointed out that its CEO, Andrew Kimball, has long looked to reduce the amount of warehouse space in the industrial-and-office development, in favor of more job-heavy tenants like manufacturers, retailers and creative office users. But the 6-million-square-foot complex is largely populated by small tenants on short-term leases, which makes a big, secure tenant like Amazon appealing.
Ultimately, Amazon is still competing with other companies looking for last-mile distribution space in a market where industrial properties are disappearing as the city rezones manufacturing areas, he said. “These are hard markets to penetrate, so you have to take what you can get when you can get it,” Marks said. “We have people in our office every week who have an unlimited budget and want to buy property for distribution centers,” but there are very few places in Brooklyn with the zoning that would allow the construction of large, new warehouses.
And building a new facility in Brooklyn could be an opportunity for the Seattle-based corporation to turn the tide on its failed PR battle in New York City, Marks argued, after it abandoned plans for a massive campus in Long Island City in the face of opposition from local activists and politicians.
“I don’t know if they care or not, but this could be an opportunity to come back into the boroughs and say, ‘Look, we’re committed to being in New York, we can show you we can be a good neighbor and a good partner in the community.'”