Bohemia warehouse project stalls months after Tesla service center rejected

A developer that received nearly $2.6 million in tax breaks is still searching for a tenant to anchor its warehouse in Bohemia after Islip's planning board rejected a proposal for a Tesla service center to open there.

The 122,000-square-foot facility on Veterans Memorial Highway, about three miles from Long Island MacArthur Airport, was built in early 2024. Venture One Development Services LLC developed the property as a speculative industrial project, meaning there was no tenant lined-up before the town granted approvals. 

Islip Town's Industrial Development Agency, or IDA, approved about $2.6 million in tax breaks for the facility, which sits on about 9.78 acres of land, in September 2021. According to the agreement, Venture One said it would create 25 full-time jobs within two years of the property being built.

Tesla sought to use the site as a collision center, but Islip’s planning board rejected that proposal in March because town rules prohibit auto body shops in the town's industrial corridor district. The district permits other uses, including medical offices, laboratories and banks.

Venture One has been "actively marketing" the warehouse in search of a new tenant, said John Walser, Islip’s director of economic development, in an email. Company representatives declined to comment on the search.

Councilman Jim O’Connor has floated the idea of clawing back the tax breaks. He told Newsday in an interview that "no one is rooting harder for them than me. … I would rather see the building occupied and thriving."

But he added, "if the job creation is not achieved, the people’s money should be returned."

At the March 19 planning board meeting, the Islip planning board rejected the proposal in a unanimous vote.

"No matter how nice it looks ... it's outright prohibited by the code," the IDA's vice chairman, Kevin Brown, told an attorney representing Tesla and Venture One during the meeting.

In a letter to the town's IDA, dated June 10, an attorney for Venture One noted that if the developer "does not find a tenant by March 2026, or if they find a tenant but the tenant does not employ enough people to satisfy the job requirements ... the [IDA] would have the legal right to terminate its financial assistance and recapture benefits."

Commercial real estate experts have cited downturns in demand for industrial space. 

A report from the global commercial real estate firm Cushman & Wakefield, published earlier this month, said "new supply continues to outpace net demand" for industrial space. 

Mike Pellegrini, an economist for the credit-rating agency Moody’s, cited "an overzealousness of new construction" during the pandemic, when demand for warehouses peaked. But that demand has since "softened" as the "surge" in pandemic-era online shopping "stabilized," he said.

Pellegrini noted that warehouses on Long Island "might have a better chance of finding" a tenant because the region’s vacancy rate is only about 3%, or roughly half the national average that sits in "the mid-sevens," he said, citing Moody's data.

In Brookhaven, the IDA's executive director, Lisa Mulligan, said warehouses have struggled to find renters. Her IDA board stopped granting benefits such as property tax breaks to warehouses last year because of stalled interest. Her board voted in June to extend that moratorium through 2025.

"What we have seen is that we have a number of spec industrial facilities that have been built and they’re aren’t a lot of" prospective tenants, she told Newsday. "My board didn’t want to incentivize additional [warehouses] if there are ones that don’t have end users in them yet."

Both Walser and Islip Town Supervisor Angie Carpenter said they are confident Venture One will find a tenant by March. 

"It's been very carefully monitored by the [town]," Carpenter said. "They’ve had a few little roadblocks. But from what I understand, they’re doing everything that they need to do."

By Sam Kmack

sam.kmack@newsday.com

Sam Kmack covers the Town of Islip for Newsday. He is a graduate of the University of Southern California and previously worked as a city watchdog reporter in the Phoenix metro area, as well as an investigative journalist at the Arizona Center for Investigative Reporting.