New York, NY Industrial Market Report Q2 2026

Manhattan | Brooklyn

New York’s industrial market remained in a period of adjustment during the second quarter as supply continued to exceed tenant demand. Vacancy increased to 7.7%, while availability reached 9.5%, reflecting the impact of significant deliveries over the past several years. Market asking rents averaged $22.65 per square foot, with annual rent growth slipping to -0.9% as landlords competed more aggressively for tenants. Net absorption totaled negative -934,000 square feet during the quarter, indicating that leasing activity has not yet matched the recent expansion in inventory.

 

Larger logistics facilities have experienced the greatest pressure as elevated availability has reduced pricing power. Even so, modern facilities in well-located infill markets continue to attract tenant interest because of their operational efficiency and access to major transportation corridors. Market fundamentals should improve gradually once recent deliveries are absorbed and new supply moderates. As construction activity slows and leasing demand gradually strengthens, landlords should regain pricing leverage in the most desirable submarkets.

 

By the Numbers

Q2 2026 | Source: CoStar Group, Inc.

Market Overview

• Tenant demand softened as recent deliveries outpaced leasing activity, giving occupiers greater negotiating leverage.
• The development cycle has shifted into its final stages as construction activity slows sharply from recent highs.
• Investment activity remains healthy despite softer leasing fundamentals, supported by New York’s long-term logistics advantages.

 

New York Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

New York Population Growth

Source: Oxford Economics

 

Brooklyn Industrial Pricing Holds Above $400 PSF

Demand

Brooklyn posted 501,798 square feet of negative net absorption in Q2 after recording 252,436 square feet of move-outs in Q1. As a result, vacancy increased to 6.9%, up from 6.43% last quarter and 6.45% one year ago. Slower leasing activity and tenant space consolidation have weighed on occupancy throughout the past year, particularly among larger distribution users. Even so, vacancy remains moderate for a supply-constrained infill industrial market.

 

Rent Per SF vs Rent Growth

Source: CoStar Group, Inc.

 

Supply

Developers delivered no new industrial space during Q2, while the construction pipeline held at 197,855 square feet. Active development has declined significantly from the more than 2.3 million square feet underway in early 2024 as projects reached completion and developers shifted to a more measured pace of construction. This should support a healthier supply-demand balance over the coming quarters, allowing the market to absorb available space as leasing activity strengthens.

Completions vs Vacancy Rate

Source: CoStar Group, Inc.

 

Investing

Investment sales totaled $148.3 million during Q2, slightly above the previous quarter’s volume. Average pricing measured $401 per square foot, while cap rates compressed to 5.25% from 5.36% in Q1. Buyers continue to target Brooklyn’s industrial assets despite softer leasing fundamentals, reflecting confidence in the borough’s long-term supply constraints and last-mile logistics demand. Investor interest has remained resilient as limited development opportunities support long-term value.

 

PPSF vs Cap Rate

Source: CoStar Group, Inc.

Investment Highlights

Volume

• Q2 sales volume totaled $148.3 million, slightly above Q1 activity.
• Buyers remained active despite softer leasing fundamentals.

Pricing

• Average sale price reached $401 per square foot in Q2.
• Cap rates compressed to 5.25%, down from 5.36% in Q1.

Manhattan Industrial Posts 6.6K SF of Positive Absorption

Demand

Manhattan posted 6,668 square feet of positive net absorption in Q2, reversing the negative absorption recorded during the first quarter. Vacancy held at 4.15%, highlighting the borough’s ability to maintain stable occupancy despite softer leasing activity. Tight inventory and limited industrial zoning continue to support tenant demand, particularly for facilities serving dense urban neighborhoods. These factors have helped Manhattan outperform many surrounding industrial markets.

 

Rent Per SF vs Rent Growth

Source: CoStar Group, Inc.

Supply

Development activity reached a minimal level in Q2, with just 567 square feet under construction and no net deliveries during the quarter. The pipeline has contracted sharply from 18,000 square feet one year earlier, leaving few projects positioned to add near-term inventory. Limited construction paired with stronger absorption helped vacancy move lower. With virtually no new space underway, existing storefronts should capture most near-term leasing demand.

 

Completions vs Vacancy Rate

Source: CoStar Group, Inc.

 

Investing

Capital activity picked up considerably in Q2, pushing sales volume to $307 million from $275.0 million in Q1 and $169.2 million a year ago. Properties traded at $1,410 per square foot, slightly above the $1,397 recorded last quarter. Meanwhile, cap rates narrowed to 7.05% from 8.17% in Q1, reflecting stronger valuations for completed transactions. The combination of higher deal flow and firmer pricing shows greater buyer conviction in Manhattan retail assets.

 

PPSF vs Cap Rate

Source: CoStar Group, Inc.

Investment Highlights

Pricing

• Average pricing registered $365 per square foot.
• Pricing reflects Manhattan’s limited industrial inventory.
• Investors accepted wider yields in exchange for Manhattan exposure.