- Borough Commercial market grows diverse
- Brooklyn in the race with Manhattan despite sales curb
- L line Canarsie tunnel closure spurs relocations and expansions
Cool Kid Brooklyn
Brooklyn has become a significant NYC commercial market alongside Downtown, Midtown and Midtown South. 2016 was the first year in a while when Brooklyn sales have gone down. Terra CRG end of year data shows a $7.8 billion sales volume, for total commercial real estate transactions in 2016. This is a drop from the previous year’s $9.5 billion but, according to the Brooklyn brokerage, no reason to doubt the borough’s potential.
One notable difference between Manhattan and Brooklyn has immediate effect on sales volume: Brooklyn high figure investments are likely to be portfolios of smaller buildings, rather than single large properties. One such portfolio landed at number 17 in our Top NYC office deals of 2016. The Jehovah’s Witnesses’ Watchtower portfolio in Brooklyn Heights and DUMBO accounted for almost 9% of total 2016 sales in Brooklyn.
With no major portfolio sales on the horizon, Terra CRG expects 2017 sales to plateau or slightly decline. However, things are not looking too bad. The Brooklyn commercial market is growing. Colliers estimates that over 20% of the Brooklyn office market is being reshaped, compared to Manhattan’s 6.5%. That’s almost 10M SF of renovated or converted office space that is planned or already under construction.
Canarsie Tunnel Renovation Spurs Market Makeover
Seven million gallons of salt water flooded the Canarsie Tunnel when Hurricane Sandy hit New York. It took 10 days to drain it and no time at all to see that the damage was extensive and major repairs were required. Since January 2015, when renovation plans were announced, the MTA conducted intense outreach to gather input from the vast community that will be affected, on both sides of the East River – customers, business owners, and elected officials.
The final decision was to shut down the tunnel for 18 months, beginning January 2019. Connectivity between the Bedford Ave station and the rest of Brooklyn will be preserved. However, an estimated 50k daily riders accustomed to heavily using the 1st Ave through 8th Ave portion of the L line will be significantly impacted.
With this restriction looming over workforce transport, Manhattan office tenants could opt for expanding or consolidating across the river. Amazon and Time Inc. are among 2016’s notable expansions, each adding over 50k SF in Brooklyn to their Manhattan spaces, according to Colliers.
Moreover, Brooklyn’s growing tenant diversity gained foreign investors in 2016, attracted by the City’s efforts to create jobs and appeal to global technology tenants. New commercial developments, alongside conversions and renovated spaces, are opening access to jobs that previously seemed contained in Manhattan.
Brooklyn’s Diverse Commercial Tenants
- public sector tenant FDNY renewed its lease of the 320k SF building at 9 Metrotech Center, for another 10 years
- Tesla Motors, automotive industry tenant, anchored the office conversion at 160 Van Brunt St with a 40k SF ground floor lease
- Japan’s second biggest beer brewer, Kirin, is forming a joint venture with the Brooklyn Brewery. This deal will speed up outfitting of the Brooklyn Brewery 75k SF expansion at Brooklyn Navy Yard and promote new hiring opportunities
- Time Inc. moved its Technology, Content Solutions and Editorial Innovation departments from long term Rockefeller HQ to Industry City, in Sunset Park
- B Amsterdam, Dutch real estate and business services provider, is opening their first U.S. office within 100k SF at Brooklyn Navy Yard
- Media company A&E Networks leased 11k SF in Crown Heights, for its new digital content agency 45th & Dean
- Supermarket chain Fairway is opening a second Brooklyn store in a 40k SF space in Bergen Beach
- 72andSunny, L.A.-based advertising firm, is expanding into 50k SF at the Empire Stores warehouse-to-office conversion in DUMBO