In the first half of 2014, total investment property sales in Brooklyn rose 38 percent from the first half of 2013 to 884, nearly twice the number of investment property sales in the city’s second most active submarket of Queens, according to Ariel Property Advisors’ Brooklyn 2014 Mid-Year Sales Report.
In addition, the number of transactions increased 34 percent to 646 and the dollar volume of those trades jumped 73 percent to more than $3.033 billion in gross consideration in the first half of 2014 compared to the first half of 2013, which saw 640 properties trade over 482 transactions totaling $1.757 billion in gross consideration. The Brooklyn 2014 Mid-Year Sales Report tracks development, multifamily, industrial, and other commercial property sales over $850,000.
Highlights from Brooklyn report:
“With strong fundamentals driving steady demand for multifamily properties and development sites, this uptick shows no signs of abating,” said Jonathan Berman, vice president of Ariel Property Advisors.
“Multifamily portfolio sales were particularly active in Brooklyn during this period, especially in Crown Heights, Bedford Stuyvesant, and Bushwick, three neighborhoods where about a quarter of the borough’s total investment property transactions were concentrated,” Mr. Berman continued.
As a further indication of the strong multifamily market, the average cap rate compressed from 5.75 percent in the second half of 2013 to 5.19 percent in the first half of 2014. Additionally, the average gross rent multiple grew from 11.24 to 11.9 over that same period.
One notable multifamily transaction was Colony 1209, a 126-unit rental building at 1209 DeKalb Avenue in Bushwick that sold for $58 million, which equates to roughly $570 per square foot and over $450,000 per unit. Another was 76 Meserole Street, a newly-constructed 49-unit rental building in Williamsburg that sold for $35.6 million, which represents a price per unit of over $725,000.
The development market remained strong as well, with the dollar volume increasing 20 percent year-over-year to more than $878 million, while the number of transactions and property sales stayed relatively stable at 125 and 234, respectively. The majority of the development properties were traded in the neighborhoods of Bed-Stuy (19), Crown Heights (16), Downtown (16), Gowanus (13), Greenpoint (17), and Williamsburg (31).
“Sites in primary and secondary locations of the borough saw high demand from developers and users alike, pushing up land values resulting in an increased number of transactions approaching or surpassing the $300 per buildable level,” said Daniel Tropp, vice president of Ariel Property Advisors. “The success of several recent new construction projects now coming online, both in Brooklyn and beyond, only further drives these numbers.”
Notable development sales include the sale of the Dupont Realty Greenpoint Development Portfolio, which was a $48.5 million transaction with 261,000 buildable square feet site as-of-right with the potential to add an additional 100,000 square feet with affordable housing. Another notable transaction is the sale of 564 St. Johns Place, a 135,000 buildable square foot site in Crown Heights that traded for $24,000,000 or $177 per buildable square foot.
Ariel Property Advisors Vice President Mark Spinelli also noted that retail is expanding in Brooklyn with national chains opening this year along Fulton Mall in Downtown Brooklyn. “The dollar volume of commercial and retail properties nearly doubled between 1H14 and 1H13, rising to $175.6 million from $97 million a year ago,” Mr. Spinelli said. “New retail and office properties in the pipeline are adding strength to this market and further illustrate that Brooklyn is evolving into a 24/7 live/work environment.”
Lastly, special purpose, user, and other industrial properties accounted for a growing share of all transactions as increasing rents and reduced inventory drove demand. Additionally the potential rezoning of certain areas such as East Williamsburg, Gowanus, and East New York has driven up these values due to higher offers based on speculation.
A copy of Ariel Property Advisors’ Brooklyn 2014 Mid-Year Sales Report is available at http://arielpa.com/newsroom/report-APA-Brooklyn-mid2014-Sales-Report.
REBNY’s Broker Confidence Index declined slightly from 9.21 in the first quarter to 8.88 in the second quarter of this year. The Commercial Broker Confidence Index was 9.45 in the second quarter down from 9.62 in the last quarter due to concerns among commercial brokers about rising land prices and the sustainability of growth in the tech industry six months from now, but overall the outlook was positive. “The growth in tourism, jobs and the continuing improvement in the local and national economy is bolstering the commercial real estate market,” the report said. The Residential Broker Confidence Index dropped from 8.80 in the first quarter to 8.30 in the second quarter because of the general lack of residential inventory, lack of product for mid-market buyers, and concern about financing sales.
A plan to redevelop the long-vacant Kingsbridge Armory into the world-class Kingsbridge National Ice Center is resulting in spikes in retail rents in the surrounding area, the Norwood News reports. More than a dozen merchants with stores across from the Kingsbridge Armory were informed that their rents will double on August 1. At a recent Community Board 7 meeting, the affected businesses were invited to consider relocating to vacant storefronts within the borders of the Jerome Gun-Hill Business Improvement District and Webster Avenue.
Permits have been filed for a 10-story, 92-unit building at 2065 Walton Avenue in the Fordham section of The Bronx, New York YIMBY reports. The land was purchased for $1.15 million last November. The property, which will be 100 percent below market, is being developed by Alan Bell and the Jericho Project, which is involved in supportive housing projects for the formerly homeless in Upper Manhattan and the Bronx. Homeless veterans will be offered 60 percent of the apartments and homeless young people between the ages of 18 and 25, with a focus on LGBT youth, will be offered the remainder.
The quarter-mile bike and pedestrian path linking the South Bronx to Randall’s Island is scheduled to open in 2015, DNAinfo New York reports. As part of the $48 million South Bronx Greenway project, the pathway will link Randall’s Island to the Bronx at 132nd Street and run south under the Amtrak trestle and over the Bronx Kill. Currently pedestrians walk to Randall’s Island using the Triborough Bridge or the pedestrian Bridge at 103rd Street in Manhattan.
Although it’s located in The Bronx, North Riverdale feels more like the suburbs, according to a NY Times profile of the area. The neighborhood features views of the Hudson River and the Palisades cliffs of New Jersey, the 70-acre College of Mount Saint Vincent, and Van Cortlandt Park. In the first six months of 2014, eight single-family homes sold for an average $653,000, and 46 co-ops sold for an average $184,000.
The WSJ profiled another area of the Bronx, Bedford Park, pointing out that residents priced out of Riverdale are finding value in the neighborhood. The area is surrounded by the New York Botanical Garden and Bronx Zoo on the east, Lehman College on the west, Montefiore Medical Center to the north, and Fordham University to the south. Webster Avenue has been rezoned to attract new residential and commercial buildings, and a new, 122-unit apartment building is being developed at East 201st Street and Webster. One- and two-bedroom co-ops sell for between $100,000 and $200,000, and single and two-family homes sell for between $375,000 and $475,000. One-bedroom rentals start at $1,000, and two-bedrooms at around $1,350.
Individuals working in creative industries who have been priced out of Williamsburg, Greenpoint, and Dumbo are seeking more affordable live/work spaces along the subway lines in neighborhoods like Crown Heights, Bedford-Stuyvesant, and North Flatbush in Brooklyn, Sunnyside and Astoria in Queens, and some areas of the South Bronx, Crain’s reports. Between 2003 and 2012, the number of design firms in Brooklyn increased by 101 percent, increased 45 percent in Queens, but only increased 6 percent in Manhattan.
Mayor Bill de Blasio’s affordable housing plans for East New York may not end up being affordable for local residents, the Gothamist reports. “As it’s written, the [citywide] unit percentage breakdown amounts to a median rent of between $1,050 and $1,670, with 8% of the 200,000 units for rent at $630,” says Shai Lauros, the director of community development for Cypress Hills Local Development Corporation. “Affordable rents for this community typically range from $375-625, so there is a discrepancy here. This could contribute to displacement.” Purnima Kapur, executive director of the Department of City Planning, acknowledged that what works in Greenpoint and Williamsburg will not work in East New York, but added that the community needs to become more “economically integrated” and not be treated as only “a poor people’s residence.”
In June, Brooklyn had 27 hotel projects with 2,416 rooms in the pipeline. Of these, seven with 544 rooms are in the planning phase, six hotels with 493 rooms are in the final planning stage, and 14 with 1,379 rooms are under construction, the Commercial Observer reports. The $80 million, 246-room Holiday Inn Brooklyn Nevins Station topped out recently at 300 Schermerhorn Street in Downtown Brooklyn, a 183-room luxury Level Hotel Brooklyn is being planned in North Williamsburg, a 200-room Starwood hotel is being developed at Pier 1 in Dumbo, and a Marriott Autograph Collection hotel is being planned in Fort Greene.