Subject to Inspection: Brooklyn Spaces and Issues
Don't Stifle Our Economic Recovery By Blaming All Real Estate Projects
Are the green shoots of economic recovery pushing through a thawing real estate market in Brooklyn? The COVID-19 pandemic all but froze up the Brooklyn commercial real estate market in 2020, but the year ended on a rebound that forecasts a stronger 2021, according to the annual Brooklyn Market Report just released by Brooklyn-focused brokerage, TerraCRG this week. Despite the lockdown pausing business last spring, more than $4 billion dollars of commercial assets still exchanged hands, with a dollar volume and transactional volume decrease of just 22 percent and 24 percent, respectively.
“The good news is the last quarter of the year experienced a rebound in activity, accounting for 30 percent of last year’s total dollar volume – momentum that we believe bodes well for a stronger 2021,” said Ofer Cohen, founder, and CEO of TerraCRG. “Brooklyn will continue to outpace Manhattan in the recovery. Our projections on an annualized basis forecast a 35 percent dollar volume increase by the end of 2021 to $5.5 billion.”
Among all asset classes, multifamily transactions had the highest dollar volume at $1.049 billion – down 8 percent from 2019 and yet still accounting for 25 percent of the year’s total dollar volume. Though activity across nearly all asset classes was down, residential development experienced an 18 percent increase in dollar volume to $791 million. A welcome sign for a Borough chronically suffering, even now with pandemic-related vacancies, from a housing shortage that keeps rents at unaffordable levels.
Investor demand for last-mile logistics also continued to fuel industrial asset sales activity, though lack of inventory caused a decline overall.
“Industrial asset sales in Brooklyn totaled $556 million in dollar volume,” said Dan Marks, partner at TerraCRG. “Sunset Park performed particularly well, with the neighborhood representing almost 40 percent of the total dollar volume and 16% of the transaction volume in the asset class.” Sunset Park continues its ascent as the most important neighborhood in the borough to last-mile logistics companies that serve the delivery needs of customers across New York City.
Meanwhile, some of the largest transactions of the year were retail-focused, including Urban Edge’s purchase of the Kingswood Center in Midwood. “While retail was one of the hardest-hit sectors nationally, Brooklyn’s retail assets showed only a 2 percent drop in average price per square foot,” said Daniel Lebor, partner at TerraCRG. This is a testament to the resiliency of Brooklyn, where foot traffic and street activity stayed robust in comparison to the ghost towns that emerged in many of Manhattan’s commercial districts during the pandemic.
These indications of renewed economic activity in Brooklyn should be a welcome sign to anyone concerned about New York City’s finances as the City’s budget deficit projections have swelled to over five billion dollars for the upcoming fiscal year, and the city has lost $10.5 billion in tax revenue from fiscal year 2020 to fiscal year 2022. There are debates taking place across the City about how to engage in an equitable recovery, including a government land acquisition
The taxes generated by the real estate transactions highlighted in this recent market report, while small in the scheme of the crisis we are facing, are a welcome step in the right direction. Building on this momentum, we should be asking our local candidates to lay out plans for leveraging this economic activity and encouraging further investment in job and housing growth in our neighborhoods. We should not be stifling it with unfair demands of the industry to shoulder the full weight of the economic recovery through increased taxes or preventing the ability to collect rent — that is a role that government spending should be addressing. And as the current budget crisis may preclude public relief at the levels now required, the best way to address the current financial crisis may well be for the government to get out of the way and get the market moving to generate the taxes we desperately need – not cut our tax base off at its roots. Let’s hope our legislators understand that.
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