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New York City Supports Industrial Development through Innovative Financing Solution

Above: Property in Ozone Park, Queens that will be redeveloped by GMDC courtesy of the NYC Industrial Developer Fund

In many cities across the country, preservation of industrial land has become difficult as strong demand for housing has led to the redevelopment of many formerly industrial sites into mixed-use projects that feature housing, retail, and office space. This loss of industrial land raises important and timely questions about how cities are pursuing balanced and equitable economic development. ICIC’s own research has shown that many industrial jobs allow workers to earn a living wage: on average, workers earn 200 percent over federal minimum wage. In addition, industrial areas—often located in inner cities—can provide accessible employment opportunities for local residents.

New York City provides many examples of this broad development trend. One illustrative project is Greenpoint Landing, located along the East River in historically heavily industrial Greenpoint, Brooklyn. The development will cover 22 acres of land and will include ten buildings and 5,000 apartments. Across the river in Manhattan, Riverside Center, is an eight acre development project rising on an old industrial lot surrounded by rail yards. The multi-tower project will include hundreds of luxury apartments and condos.

While these large scale projects are indicative of changing patterns in land use, the demand for industrial space is still present. While industrial jobs in New York City have largely declined since the 1950s, the drop in manufacturing jobs has slowed considerably since 2010, and the sector has produced small net gains in the past few years. Similarly, New York City’s wholesale and construction jobs have stabilized, and, in some subsectors, have added jobs in recent years. In fact, New York City’s industrial and manufacturing sector still employs more than 530,000 people – or 15.4 percent of the city’s private sector workforce. The median wage for industrial jobs in New York is $50,400 a year, and an estimated 63 percent of these jobs do not require a college degree.

Yet, even as the total amount of industrial land contracts, much of the remaining industrial space is a mismatch for the modern-day industrial economy, and developers can usually command a significantly higher premium for new Class A housing or office space compared to building new Class A industrial space. Therefore, even though industrial space is needed to accommodate the city’s industrial economy, it simply isn’t being built.

Enter the NYC Industrial Developer Fund, one of the first of its kind in the nation.

In an effort to stimulate the production of industrial real estate, the New York City Economic Development Corporation has created a $150 million fund intended to provide gap financing in the form of grants, low-interest subordinate loans and guarantees for senior private loans. The fund includes an estimated $60 million in public funds that supplement owner equity in an effort to leverage the fund’s nearly $90 million in traditional bank financing. The goal is that the fund will help create approximately 400,000 square feet of new or renovated industrial space and about 1,200 new jobs.

The fund was first conceived as part of New York City’s Mayor Bill de Blasio’s Industrial Action Plan released in 2015. “Manufacturing isn’t just part of New York City’s past – it is a thriving part of our 21st century economy,” said Mayor de Blasio in 2015. “We are positioning our industrial businesses to take advantage of new technology and new demand.”

While both nonprofit and for-profit companies can secure financing through the fund, only nonprofit developers are eligible for grants. Projects are evaluated based on their ability to create high-quality real estate that supports quality, long-term and accessible industrial jobs, including jobs across the industrial ecosystem, from warehousing to light and heavy manufacturing. Projects must be at least 25,000 square feet in size and must be located within one of the city’s five boroughs.

NYC Industrial Developer Fund in Action

The fund has already been leveraged for several projects. One of the projects is being spearheaded by the Greenpoint Manufacturing & Design Center (GMDC), a nonprofit that formed in the early 1990s by renters trying to save a decrepit industrial property that was at risk of being torn down. GMDC saved that building in 1994, and has since preserved a number of other industrial properties.

“Every year we look at scores of sites,” says Brian Coleman, Chief Executive Officer of GMDC. “We bid on buildings and don’t get them. Last few buildings we’ve bid on, we’ve lost to self-storage facility operators. We can’t offer the same pricing that some of these competing uses can.”

Now, GMDC is exploring the feasibility of preserving a 90,000 square foot former bicycle factory in Ozone Park, Queens. The NYC Industrial Developer Fund is offering a $10 million grant and a $3.7 million loan to support its redevelopment into a multi-tenanted manufacturing space for small- and mid-sized manufacturing businesses. In total, the project is expected to create 80 permanent jobs – far more than the three or four jobs the self-storage facility would have created – and these jobs will pay an average of $51,500 per year.

“This is an important step forward for equitable economic development policy in New York City,” said Benjamin Dulchin, Executive Director of the Association for Neighborhood and Housing Development. “GMDC is an exemplary recipient of the Industrial Development Fund. As a non-profit developer, GMDC is mission-driven to create the maximum public benefit for their community, and this new project will create new space to support good paying industrial jobs, and long-term investment in the manufacturing sector.”

Currently, the NYC Industrial Developer Fund is also supporting the $115 million renovation of the Brooklyn Army Terminal, a former military supply base that will be repurposed to support manufacturing companies, and $700 million worth of new development at the Brooklyn Navy Yard. Overall, the strategy is on its way to reaching its industrial space and job creation goals by 2020.

An Innovative Solution as Part of a Comprehensive Approach

 The NYC Industrial Developer Fund stands out as a forward-thinking approach to new industrial development. While most cities are focused on preservation of existing industrial space, the City of New York is keenly aware that existing real estate is not sufficient for the demands of the 21st century industrial economy. Buildings need to be significantly renovated, or often built from the ground up—development scenarios that are tough to pencil out given current market pressures.

The fund, as noted above, is one piece of a broader industrial strategy that the City adopted and continues to push forward. Other components of the plan include investing in city-owned industrial properties, creating new models for flexible work spaces and innovation districts, providing funding to launch workforce development initiatives and establishing career centers in five different New York neighborhoods. An advanced manufacturing network called “Futureworks NYC” was also launched as part of this strategy, aimed at bringing together industry and community stakeholders. This comprehensive approach will support the industrial sector in a number of ways, and reaffirms the city’s commitment to creating well-paying, inclusive jobs.

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