NEW YORK CITY—The needs of today's local CRE market have made the frequent conversions of Brooklyn's warehouses and other industrial properties into hotels, retail properties or apartments very logical and, on the whole, beneficial to the borough. But what do those changes mean for industrial tenants being displaced?
GlobeSt.com sat down EXCLUSIVELY with Jakub Nowak, associate real estate broker, industrial investments at Marcus & Millichap, to discuss the toll of this trend on industrial occupiers.
GlobeSt.com: Many of Brooklyn's warehouses and traditional industrial buildings have been converted to other uses. How is this affecting area industrial firms?
Nowak: People are really paying attention to the redevelopment on the waterfront but what they don't talk about is the back end, meaning if you're an industrial company and you have to be in the outer boroughs, the competition for traditional industrial space has become much tougher. It's a limited field because some of these buildings are becoming retail properties or hotels.
GlobeSt.com: Are companies finding new areas to go to?
Nowak: Yes, they're going to areas like Sunset Park, East New York, Ridgewood, even places that might be far from transportation. But because of all the redevelopment, prices have gone up from $200 per square foot, on average, to $300 to $400 per square foot—or sometimes even $600 per square foot—in two to three years. That's staggering price growth.
If you were in Boerum Hill and now your warehouse is being redeveloped into a hotel but you want to stay along the Brooklyn-Queens Expressway, you might have to go to Sunset Park and pay those higher prices.
GlobeSt.com: How is the redevelopment of the Brooklyn Navy Yard impacting the borough's industrial sector?
Nowak: Recent developments in and around the Brooklyn Navy Yard, particularly Dock 72—the site anchored by WeWork—and the Admiral's Row development which will be anchored by Wegman's Food Markets—are boosting demand for commercial and conversion opportunities in Northern Clinton Hill. WeWork committed to Rudin Management and Boston Properties for $60 per square foot, which is a completely unheard of rent. It shifts the paradigm for what rents property owners are seeking.
GlobeSt.com: What do you expect going forward?
Nowak: As long as the city keeps growing at its current pace, I don't see these issues changing.
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
