By the mid-19th century, the opening of the Atlantic Basin transformed Red Hook into one of the country’s busiest ports.
In 2017, a new development mere blocks from the basin might earn Red Hook back its shipping hub status. But this time, the goods will be purchased with the click of a mouse.
Italian developer Est4te Four sold five of its Red Hook waterfront industrial properties to a private equity firm for around $110 million in May 2017. The warehouse spaces will be updated as distribution centers for e-tailers (online retailers), ensuring the speedy delivery of products to New York City’s online buyers.
Sitex Group, a New Jersey-based firm, specializes in acquiring industrial real estate to rent out to e-commerce companies. E-commerce – the buying and selling of things online – has played a role in the decline of traditional retail for over a decade.
Sitex purchased Est4te Four’s former warehouses at 68 and 100 Ferris Street, parking lots at 44 Ferris and 219 Sullivan Street, and the warehouse at 242-300 Coffey Street. The acquisitions all fall within M2-1 zoning, a subset of manufacturing districts common to the city’s older industrial waterfronts.
Est4te Four also owns 160 Imlay Street, which the company is converting into 70 luxury condos. Formerly the site of New York Dock Co., the six-story building will reserve its first two floors for commercial space.
The site at 202 Coffey Street also remains an Est4te Four property. As promoted on their website, the red brick warehouse will transform into a cultural programming space that will also host high school digital media programs and community organizations.
Sitex plans to utilize their new acquisition as a center for “last-mile distribution,” an industry buzzword that describes the final stop for an online purchase before traveling to the buyer.
Community braces for more truck traffic
If e-commerce distribution moves in, some locals are concerned about spikes in truck traffic.
An old maritime business owner based in Red Hook spoke to locals in the distribution transportation business about the incoming businesses. “The center would potentially have a few couple hundred vans in and out every day,” he estimates.
The local business owner, who asked to remain anonymous, worries about potential traffic congestion caused by warehouse reloading with 53-foot long trailers. “When they make turns, it becomes very challenging for them to navigate through our streets, and that’s not including the tractor, the part that pulls the trailer,” he says. Tractor included, a 53-foot trailer spans over 70 feet long.
Brian Milberg, a principal at Sitex, told DNAinfo that he estimates 200-500 jobs could be generated from such a development project. Milberg minimizes the potential for heightened truck traffic, citing Snapple, a current warehouse tenant with an expiring lease, as already contributing to a certain level of truck traffic in the vicinity.
The maritime owner suggests an alternative to trucks: utilize waterways. “Shipping over water would be preferable because it would alleviate traffic,” says the local. He suggests creating ferry landings to complete hyper-local deliveries.
For now, Sitex expects shipping to occur over land as opposed to barging.
According to a Sitex representative, the firm does not yet know which companies will move into their new turf. Big box stores and e-tailers are likely to move into the warehouses, which will briefly store products before being shipped to customers.
Modern industrial tenant
Significant renovation to the properties is expected. The Sitex representative stressed that the warehouse spaces will be outfitted to suit the “modern industrial tenant,” supporting light manufacturing, e-commerce, and last-mile distribution.
Sitex’s acquisition on the Red Hook waterfront marks the firm’s first foray into New York City limits, but unlikely its last. They plan to expand in Brooklyn and Queens, but must reckon with rising prices for industrial real estate.
“Pricing for industrial properties has skyrocketed due to a dwindling supply (many warehouses are being converted to offices or retail stores),” wrote the Sitex representative in an email to the Star-Revue. “Demand from industrial tenants is increasing, which is driving rents, which ultimately drives up pricing.”
Sitex landed a $94 million acquisition loan from LoanCore Capital for the Est4te Four disposition, The Real Deal reported. Est4te Four originally bought the properties for $66 million in 2014.
The sale to Sitex confirms Est4te Four’s scrapping of plans to realize Red Hook Innovation Studios, a $400 million development. The 1.2 million-square-foot constructed office space intended to court tenants of the art, tech, and fashion worlds, but Est4te Four had difficulty financing the project.
