Developers are actively acquiring single-story warehouses south of the Queensborough Bridge and plan to replace them with five- to seven-story residential buildings. This strategy is creating a new arbitrage opportunity in Queens as rezoning unlocks higher-value residential development on former industrial sites.
A growing group of investors is targeting industrial properties in Queens for residential conversion, according to Eitan Hakami, a licensed associate broker at Greiner-Maltz Real Estate who specializes in Brooklyn-Queens industrial properties. Hakami reports that recent zoning changes have made large areas south of the Queensborough Bridge particularly attractive. “A lot of industrial properties south of the Queensborough Bridge have been rezoned, and you have people buying there for development purposes,” he says.
The economics of these conversions are straightforward. Hakami explains that a typical single-story warehouse with a 5,000-square-foot footprint can now be redeveloped as a multi-story residential building, often five to seven stories tall. This shift allows developers to increase usable square footage and significantly increase a property’s value. “If you can build five, six, seven stories of residential there, you’ve made out with a lot of money,” Hakami says.
Anticipating the Next Rezoning
The rush to acquire rezoned properties is only part of the story. Investors are also speculating on which industrial areas will be rezoned next, hoping to secure sites before values rise further. Hakami observes that some buyers are less interested in current industrial rents than in the potential for future residential development. “Smart money is trying to guess what the next rezoning is going to be,” he explains.
This approach marks a shift from traditional industrial investment, which focuses on stable rental income, to a speculative land banking model. Investors are betting on municipal zoning decisions, accepting current industrial cash flow while waiting for regulatory changes that could unlock higher returns through residential redevelopment.
The Williamsburg Example
Brooklyn’s Williamsburg neighborhood serves as a model for how rezoning can reshape property values and attract new investment. Hakami notes that Williamsburg and Sunset Park remain hotspots for development, with Williamsburg in particular drawing attention as a lower-cost alternative to Manhattan. He notes that even as Williamsburg has become one of Brooklyn’s most expensive neighborhoods, investors continue to see upside in additional residential conversions.
Hakami also notes that investment decisions are increasingly driven by zoning and development potential rather than traditional neighborhood boundaries. The distinction between Brooklyn and Queens is less important than whether a property can be redeveloped for residential use. “It’s beginning to bubble only because it’s a lower-cost alternative,” he adds, emphasizing that capital is following zoning opportunities rather than established neighborhood lines.
Institutional Investors Target Smaller Sites
The residential conversion trend is attracting not just small developers but also institutional investors, who are now considering properties far smaller than those they would have targeted in the past. Hakami says institutions are looking at 20,000- to 30,000-square-foot industrial sites, a departure from their usual focus on properties of 100,000 square feet or larger. “They’re looking at those properties now, not just the 100,000, 200,000 properties,” he says.
This shift suggests that the potential returns from residential conversion are changing what institutional buyers consider viable. Smaller industrial buildings, once overlooked by large investors, now represent attractive opportunities if located in areas with residential development potential. The prospect of converting a modest warehouse into a multi-story apartment building is drawing sophisticated capital to sites that previously would not have met institutional criteria.
Market Timing and Industrial Headwinds
This rezoning-driven strategy comes at a time when industrial fundamentals in Brooklyn and Queens have weakened. Industrial property sales in the area fell by nearly 67% in 2025, reflecting a slowdown after the post-pandemic warehousing surge. Hakami notes that overbuilding in larger properties has contributed to a softening market.
Against this backdrop, residential conversion offers an alternative for owners dealing with rising vacancy or stagnant rents in traditional industrial assets. Rather than compete for a shrinking pool of industrial tenants, property owners in rezoned areas can pursue residential development, which may provide higher returns and greater long-term value.
Expanding the Playbook
Hakami’s comments indicate that this strategy may soon reach beyond areas currently rezoned for residential use. Investors are increasingly willing to buy industrial sites based on the possibility of future zoning changes, prioritizing development potential over immediate cash flow. If this approach proves successful, it could create a new investment category focused on future development rights and optionality rather than stable income.
In Queens, where Hakami sees the most activity, this emerging thesis positions the borough as a distinct opportunity market, separate from Brooklyn’s more established industrial corridors. Whether this bet pays off will depend on the pace of future rezoning and the strength of demand for new residential projects in converted industrial neighborhoods.
Looking Ahead
The quiet accumulation of industrial properties for residential conversion is reshaping the investment landscape in Queens. As developers and institutions position themselves ahead of potential rezoning, the borough could see a wave of new housing construction and rising land values. For now, the strategy hinges on a combination of regulatory timing, market fundamentals, and investors’ willingness to accept short-term uncertainty in exchange for long-term gains.
