NEW YORK CITY—In a clear sign of the times, CBRE Group used its third quarter briefing on Thursday to tell reporters about Brooklyn's retail and office markets from ETSY's still-under-construction headquarters in DUMBO Heights.
“Brooklyn's office market is expanding due to the concentration of creative talent living in the borough as well as landlords investing in the necessary capital improvements to make their buildings compelling for creative companies looking to relocate into Brooklyn,” said Frederick Fackelmayer, SVP CBRE, who negotiated Etsy's 225,000-square-foot office lease at DUMBO Heights, Brooklyn's largest tech office deal on record.?
“The Midtown South creative base is running out of options,” he added. “Pricing is getting expensive and floorplates are becoming an issue.”
“Brooklyn's growth as a major New York City office market has evolved over the last 10 years,” added SVP Keith Caggiano, who has represented tenants and landlords in the market for more than a decade. “Once dominated by back-office requirements for primarily financial services firms, the tenant diversity now closely resembles Manhattan, with all major segments of New York's economy well represented.”? ?
That shift is due, at least in part, to a changing profile of senior executives, he notes. “As the residential inventory evolves, we're finding more CEOs living in Brooklyn.”
Continued Sacha Zarba, EVP, “Increasing tenant demand and the lack of attractive investment opportunities in Manhattan are leading institutional-quality office developers that had never been active in Brooklyn are breaking ground on projects across the East River.”
“Developers such as Kushner Cos., RFR Realty, Invesco and LIVWRK at DUMBO Heights, Tishman Speyer in Downtown Brooklyn; along with Boston Properties and Rudin Management at the Navy Yard have all put down stakes in an effort to attract creative companies with premier space at competitive rents, aided in part by REAP benefits.”?
The Relocation & Employment Assistance Program, the panelists noted, provides companies that move to Brooklyn with a tax break of $3,000 per employee, per year, for 12 years. That works to roughly to a $14 to $18 per square foot break on rent.
But SVP of retail Lon Rubackin added, ?“As office leads the charge, retail is attempting to catch up in the historically under-served borough. Retail tenants are having to deal with emerging neighborhoods like DUMBO and Downtown Brooklyn that have asking rent spreads as wide as $50 to $400 per square foot, making entering the market complicated.”? ?
On the office side, according to CBRE's Brooklyn research, the DUMBO submarket has the borough's highest average asking rent and availability rate. This is driven by the 242,200 square feet of available space at Empire Stores, where asking rents range from $65 per square foot on lower floors up to $85 per square foot on upper floors, as well as availabilities at DUMBO Heights.
"Investors are looking at Brooklyn becuase of momentum, demand and tons of opportunity," declared Caggiano. "The borough is massive and we're just starting to tap into it."
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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.
