Brooklyn real estate activity is up from last year across the board
Neighborhood retail returns in a big way
The dollar volume of real estate investment sales in Brooklyn totaled $5.56 billion in the first half of 2022, a slight dip of 8 percent from the second half of 2021, but up a whopping 213 percent year-over-year, according to a research report produced by Ariel Property Advisors, “Brooklyn 2022 Mid-Year Commercial Real Estate Trends.”
This year-to-year increase cut across several sectors: multifamily housing, commercial and industrial, according to Ariel, which describes itself as a commercial real estate services and advisory company headquartered in New York City.
Interesting trends found in the report include the return of small, neighborhood retail, which took a hit during the pandemic; institutional investors buying up multifamily housing developments; and more commercial real estate activity in Southern Brooklyn as opposed to high-priced neighborhoods in Downtown and North Brooklyn.
Transaction volume followed a similar pattern to investment sales, with 619 transactions in the first half of 2022, roughly the same as the second half of 2021. However, this is a 55 percent increase compared to the first half of 2021.
“The first half of 2022 continued the momentum built during the last few months of 2021 as New York City looked to put the pandemic fully in its rear-view mirror,” said Sean Kelly, partner at Ariel Property Advisors. “Rent and vacancy rates have not only returned to pre-pandemic levels but have surpassed them.”
Stephen Vorvolakos, director of Ariel, said, “We’re also seeing institutional buyers aggressively pursuing deals in Brooklyn. Six months into the year, there were nine $100-plus million transactions, a number that matches the total for all of 2021.” Institutional buyers, according to online sources, are corporations, funds or LLCs, rather than real estate companies or individual landlords.
The report’s findings include:
Multifamily housing: After being hit hard during the COVID-19 pandemic, the multifamily market in Brooklyn began a strong bounce-back during the first half of 2021 that continued into 2022. The 410 total multifamily transactions in the first half of 2022 were the most ever recorded in Brooklyn’s history.
While the total dollar volume for the first half of 2022 dropped 34 percent to $2.7 billion compared to the second half of 2021, by removing the $1.3 billion partial interest sale of Starrett City in the second half of last year, Brooklyn’s multifamily dollar volume remained the same, the report said.
The largest multifamily sale during the first half of 2022 was Avanath Capital Management’s purchase of 38 6th Ave. and 535 Carlton Ave. for $314.5 million. This is part of the trend of institutional buyers purchasing multifamily housing mentioned above.
Commercial: Total dollar volume for commercial assets (which includes both offices and retail) fell 12 percent to $271 million in the first half of 2022 compared to the second half of 2021, but rose 65 percent year-over-year. While the commercial/retail asset class was the hardest hit during the pandemic, the first half of 2022 marked the return of small local neighborhood retail.
While “prime” neighborhoods like Williamsburg, Greenpoint and Downtown Brooklyn typically see the majority of activity in the commercial and retail real estate sectors, only two commercial sales occurred in those locations during the first half of 2022. All the other sales occurred in Central and South Brooklyn, with Sheepshead Bay and Borough Park leading the way
Of the 51 commercial transactions in Brooklyn, 70 percent traded for less than $5 million and 45 percent traded for less than $3 million. Because of the small scale of these transactions, the average price per foot increased to $683, according to the report.
Industrial. The dollar volume of industrial trades jumped 66 percent to $934 million compared to second half 2021 (and a huge 420 percent year-over-year) thanks to the $332 million sale of 640 Columbia St. in Red Hook and the $228.5 million sale of 554-578 Cozine Ave. in East New York. Both properties are fully leased to Amazon. These two are the largest industrial/warehouse transactions ever recorded in Brooklyn, according to Ariel.
Despite a 21 percent drop in transaction volume during the first half 2022 compared to second half of 2021, the 49 industrial transactions recorded during the first half of 2022 are equal to the second highest level during the first half of a year since 2016.
Development. Development dollar volume fell 9 percent to $773 million in the first half of 2022 compared to second half of 2021 but increased 96 percent year-over-year. The development market started the year off strong but lost momentum halfway through the first half of 2022. Roughly 67 percent of both the transaction and dollar volume occurred during the first quarter of the year as developers were rushing to get their shovels in the ground before the June 15 expiration of the 421a tax abatement. The average price per buildable square foot increased to $280, the highest level on record in Brooklyn.