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No one thought much of it when a two-story,12,700-square-foot industrial building in Sunset Park, Brooklyn, went on the market late last year. In due course, a bidder appeared and discussions began; then the floodgates opened.
"We were in final negotiations with one guy, and all of a sudden people were coming out of the woodwork," said Adam Hess, then a vice president with Massey Knakal and now a partner at brokerage Terra CRG.
Ultimately, five firms bid on 335-347 38th St., including two food distributors, a heating and cooling company, and a noodle maker. The winner was Window-Fix, with a bid of $1.65 million. That translates to $160 a square foot for the first-floor industrial space (the second floor is for offices), a few dollars less than it might have fetched at the market peak in 2008.
"It wasn't cheap, but it's worth it because we need more space to grow our business, and we need easy access to all five boroughs," said Ernie Capello, owner of Window-Fix.
As Mr. Capello and his rival bidders can attest, the city's industrial property market is hot. Unlike its commercial and residential cousins, the overlooked sector is largely an outer-borough one, with 177 million rentable square feet in Brooklyn, Queens and the Bronx alone, CB Richard Ellis estimates.
Climbing back fast
And it came through the downturn just fine. In the city outside of Manhattan, the industrial market had sales of $312 million last year--an average of $138 a square foot, or about 25% off 2008's frothy peak, according to Real Capital Analytics data.
Figures for leased space show similar trends, with deals signed at an average rent of $11.73 a square foot in the fourth quarter, just 10% off peak levels, according to CoStar. And prices are rising.
"It's becoming difficult to find better space under $12 a square foot, and you're seeing some going for $15," said Alan Weisman, executive managing director of Grubb & Ellis in New York.
Demand is coming from small and large businesses alike. In the latter group is fine-art auctioneer Christie's, which leased 218,800 square feet...