NEW YORK, NY – March 30, 2012 – (RealEstateRama) — March 30, 2012—Brooklyn saw 377 commercial real estate transactions in 2011 consisting of 562 properties and totaling approximately $1.8 Billion in gross consideration, according to the Brooklyn Year-End Sales Report 2011 released by Ariel Property Advisors.
“Rather than being viewed as a traditional ‘alternative’ to Manhattan, Brooklyn is becoming its own unique destination for residents and investors alike,” said Jonathan Berman, vice president of Ariel Property Advisors. “Recently referred to as the ‘Coolest Place to Live in the World’ by GQ magazine, this strength is reverberating throughout the borough’s many neighborhoods, despite their proximity to Manhattan. This trend is particularly evidenced by the large number of transactions in the Bedford-Stuyvesant / Bushwick / Crown Heights area, the ongoing transformation of the area surrounding the Barclays Arena, and some blockbuster institutional multifamily and development sales in Williamsburg and Greenpoint.”
According to the report, the Bedford-Stuyvesant / Bushwick / Crown Heights neighborhoods had more than 40 percent of all the borough’s transactions in 2011. The multifamily market was the most robust commercial real estate sector, and cap raps remained within the attractive range of 6-7 percent.
“With low interest rates, little supply, and many investors anticipating residential rents catching up with Manhattan levels, we expect cap rates to remain competitive and prices per square foot to increase throughout 2012,” Mr. Berman said. “We believe that 2012 will be a breakthrough year for the borough and with the strong rental market, that we will see a rise in prices per square foot for the entire borough. With that, the major beneficiaries will be once again the Downtown / Park Slope area, Williamsburg and Greenpoint.”
Anticipating a significant increase in pedestrian and vehicular traffic surrounding the Barclays Arena, which is slated to open in the fall of 2012, building owners in area are asking higher retail rents, according to the report. “In fact, national tenants are actively seeking space and commercial rents are beginning to consistently command over $100 per square foot,” Mr. Berman said. “Such rapid increases are naturally leading to major increases in property values.”
The Williamsburg / Greenpoint area continues to show its strength. In 2011, 173 Kent Avenue was sold by Equity Residential for $73 Million to an institutional buyer. Warehouse 11, a condominium property that had a brush with foreclosure, represented an excellent case of recovery as all of its remaining units sold out. While the Williamsburg and Greenpoint areas still have a significant number of stalled developments, it is just a matter of time until they are restructured and recapitalized, especially as residential inventory declines.
The report highlights multifamily, development site, and retail and commercial property sales, and the market fundamentals that influenced investment sales in 2011, as well as a map of the transactions that took place in Brooklyn in 2011 separated by property type.
Multifamily
In 2011, Brooklyn’s multifamily asset class saw 223 transactions consisting of 285 buildings sold for an aggregate consideration of $925 Million. This activity accounted for 51 percent of the area’s total dollar volume.
Prices per square foot (PSF) in the Downtown / Park Slope region were the highest in the borough, reaching on average $300 PSF. Williamsburg closely followed at $265 PSF and Southern Brooklyn at $180 PSF.
Development Sites
The borough’s development market has started to wake up, according to the report. During 2011 there were 47 transactions comprised of 126 properties. The total consideration was over $200 Million. The majority of the significant development activity was in the Williamsburg / Greenpoint region, but the Bedford-Stuyvesant / Bushwick / Crown Heights region was not far behind.
The development market is strongly affected by the banks willingness to lend. The expectations for 2012 are that the banks will loosen their loan requirements and more money will flow to the development market. Therefore more transactions will take place.
Market Fundamentals
Brooklyn condominiums traded at an average price per square foot of $664 in 2011. This is mainly because the majority of the transactions took place Downtown and in Park Slope, the higher priced areas of the borough. This volume should become a trend in the upcoming years due to the influx of young families.
Overall, residential rents in the borough were up. The areas that saw the highest increase are the areas with the highest number of free market apartments: Downtown / Park Slope & Williamsburg / Greenpoint. Rents in these areas were at or above $30 PSF. These high rents are in contrast to the rents collected for rent stabilized buildings which averaged around $18 PSF.
Retail rents and free market rents are usually in correlation. The areas that attract higher paying tenants also have higher paying retail rents. Williamsburg / Greenpoint and the Downtown / Park Slope areas are the major story with retail rents averaging between $35 and $40 PSF. Naturally this can vary significantly and is very location specific. In 2012 and future years, we expect that the Barclays Arena area will command significantly higher retail rents. In fact, rents in this area are reportedly starting to exceed $100 PSF on a consistent basis.
More information is available from Mr. Berman at 718-475-9800, ext. 20 or jberman (at) arielpa (dot) com. For a copy of the report, please see http://arielpa.com/newsroom/report-APA-Brooklyn-2011-Sales-Report.
Photo caption:
Jonathan Berman, vice president, Ariel Property Advisors.
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The Brooklyn Year-End Sales Report 2011 (para.1)
http://arielpa.com/newsroom/report-APA-Brooklyn-2011-Sales-Report
Ariel Property Advisors (para.1)»
http://arielpa.com/about/company/
Jonathan Berman (para.2)
http://arielpa.com/about/team/jonathan-berman/
Ariel Property Advisors is a New York City investment property sales firm with an expertise in the multifamily market. The firm also produces a number of research reports including the Multifamily Month in Review: New York City; Northern Manhattan Sales Report; Northern Manhattan Commercial Report; and the Northern Manhattan Residential Rental Report. More information is available at arielpa.com.
Gail M. Donovan
Director of Communications
Ariel Property Advisors
P: (212) 5449500 ext. 19
C: (917) 3015706
