Brooklyn and Long Island City Office Markets Ramp Up
As millennials flock to live and play in Brooklyn and Long Island City, Queens, work space is also driving leasing activity, according to CBRE’s latest office market reports.
NEW YORK CITY—CBRE’s recent research bodes well for offices in Brooklyn and Long Island City, Queens. Brooklyn’s leasing activity in Q2 2019 at 599,000 square feet was 71% above the four-year quarterly average. It was the borough’s consecutive quarter with office leasing topping 500,000 square feet. Long Island City, Queens leased 558,000 square feet of office space for H1 2019. This represented a 170% increase above the 207,000 square feet leased in H1 2018.
Brooklyn
In the first half of 2019, Brooklyn experienced 1.27 million square feet of office leasing activity. This was a 76% increase year-over-year and 21% greater than the entire 2018. CBRE attributed the activity to technology companies accounting for 38% of the leases, and apparel and retail tenants accounting for 23% of the total.
“The Brooklyn office market benefitted from price pressure across the East River as the second quarter saw multiple tenant relocations from Manhattan,” says Nicole LaRusso CBRE director, research & analysis. She adds 17% of the borough’s office leasing resulted from departures from Manhattan.
LaRusso points out there are seven new construction projects and four office development conversions underway in Brooklyn. Although that creates more inventory, LaRusso notes there’s high demand in the borough for space for larger tenants.
The most popular submarkets were DUMBO, Williamsburg/Greenpoint and Downtown Brooklyn. DUMBO saw 188,000 square feet of leases—up 188% from the last quarter. Rent the Runway’s 83,000 square feet at 10 Jay St. helped bump up the stats. Netflix moved into 161,000 square feet at 333 Johnson Ave. in East Williamsburg.
In Downtown Brooklyn, the New York City Department of Citywide Administrative Services renewed 342,000 square feet at 250 Livingston St. For mid-sized (25,000 to 100,000 square-foot) leases, Downtown activity increased 116% from a year ago. This included New York State Workers Compensation Board signing on for 55,000 square feet at 1 Pierrepont Plaza, and Magellan Health Services leasing 37,000 square feet at MetroTech Center.
However, South Brooklyn and the Navy Yards showed a more depressed second quarter. South Brooklyn was down 66% from a year ago. And the Navy Yards sadly leased only 1,200 square feet, a 99% drop from the prior quarter.
Long Island City, Queens
CBRE also reports this neighborhood is drawing tenants. In addition to the 558,000 square feet of office space leased during H1 2019, there was 119,000-square-feet of renewal activity. But absorption was negative with the availability rate increasing to 24.7% in H1 2019. The market asking rent declined 9% year-over-year compared to H1 2018, averaging $41.77 per square foot.
LaRusso called the submarket a mixed bag. The new added supply will provide opportunities for tenants who want to capitalize on the location and value of the market, she says.
Notable transactions in Long Island City in H1 2019 were major deals at One Court Square: Centene Corporation leased 329,864 square feet; Altice USA renewed 103,133 square feet and Collins Building Services renewed and expanded 30,760 square feet. These deals followed Amazon’s cancelled plans to lease in the building, following their HQ2 reversal.