In recent years, the industrial rent growth in Albany, New York, has been on an impressive climb, peaking at a remarkable 9.4% annual increase in the third quarter of 2022. However, the tide is turning for this bustling market.
Like its counterparts nationwide, Albany's industrial property sector is feeling the pinch of an inflationary economy and widespread economic uncertainties. This climate has prompted many businesses to adopt a more conservative approach, putting the brakes on aggressive expansion plans.
According to CoStar's base case projection, Albany's industrial rent growth is expected to moderate, aligning closer to the 4% to 5% range by the end of 2024, reminiscent of the growth rates observed in 2019. Should economic challenges persist, a more cautious outlook suggests a potential decline in rent growth, possibly dipping to around -1% by mid-2025.
Despite these adjustments, industrial leasing activity in Albany remains robust, buoyed by both lease renewals and new signings. The past year saw approximately 38 industrial lease agreements, averaging around 21,000 square feet each, with effective rents hovering at $7.95 per square foot.
Notable transactions include Soft-Tex's move to boost its U.S. operations from China, doubling its production in Saratoga County with a renewed 120,000-square-foot lease at 428 Hudson River Road in Waterford in March 2023.
Even with steady leasing, the completion of additional industrial projects has kept Albany's vacancy rates relatively stable, only inching up by 30 basis points to 2.3%. The past year witnessed the delivery of roughly 1 million square feet of new industrial space, a significant increase compared to the decade's annual average of 500,000 square feet.
A standout project in this influx of space was Amazon's occupancy of a distribution facility in South Schodack at 1710 Schodack Valley Road in June 2023.
Amidst these dynamics, the demand for modern logistics spaces remains strong across Albany, pushing rent growth in this category to 7.9%. However, the growth rates for flex and specialized industrial spaces are trailing, staying below 5%.
Geographically, prime logistics areas like Outer Schenectady County, northwest of Albany, are witnessing the most substantial rent increases, averaging 8.4% annually, although the average rent of about $6.90 per square foot in this area is still below the regional average.
In contrast, downtown Schenectady's average industrial rent growth has seen a decrease of 350 basis points over the past year, settling at 4.5%.
Source: Loan Analytics, CoStar