“Prices for development sites in Brooklyn's emerging areas increased sharply during 2013,” says Daniel Tropp of Ariel. “Bushwick and Bedford-Stuyvesant, for example, saw prices for some development sites more than double the 2012 average price per buildable square foot.”

Notable transactions in these neighborhoods included the $4.2 million purchase—and subsequent conversion—of the former Alhambra Theatre at 785 Knickerbocker Ave. in Bushwick, and the sale of the former General Linen Supply & Laundry plant at 835 Myrtle Ave. in Bedford Stuyvesant to Alliance Private Capital Group for $27 million.

Brooklyn's multifamily transactions jumped 44% year-over-year to 657, the number of properties sold increased 36% to 760, and the dollar volume of those trades rose 29 percent to $1.9 billion.

The demand for multifamily product put upward pressure on pricing and resulted in borough-wide average cap rates falling to 5.75% in 2013 from 6.9% 2012, and borough-wide average gross rent multiples increasing to 11.24 from 9.26. High-end submarkets in Brooklyn commanded capitalization rates and rents on par with Manhattan prices, the report says.

“Historically low interest rates, combined with average Brooklyn rents that increased 10% from December 2012 to December 2013, brought multifamily investors to the borough searching for value in up-and-coming neighborhoods,” says Jonathan Berman of Ariel Advisors. “In fact, Bedford-Stuyvesant, Bushwick, and Crown Heights together recorded the highest number of transactions and properties sold in Brooklyn in 2013.”

“The continued success of Barclays Center, which in its first full year of operation generated more ticket sales than any other arena in the United States, contributed to increasing property values and rising retail rents in surrounding neighborhoods such as Boerum Hill, Park Slope, and Prospect Heights,” notes Mark Spinelli of Ariel Property Advisors. “Retail rents in the area have risen rapidly from the mid-$50's per square foot to levels approaching $200 per square foot.”