By James Nelson, Partner,
Cushman & Wakefield
(formerly Massey Knakal)
2014 was the year of the boroughs for New York City. After the correction in the market in 2009-2010, we saw a flight to safety with Manhattan sales leading the recovery.
In 2011, Manhattan generated 32% of the sales even though the borough accounts for only 17% of the properties, according to data by Massey Knakal (now Cushman & Wakefield). This year, it looks like that level will decline to a more proportionate share of the sales with “only” 17% of the sales, meaning that the Boroughs should end up with about 83% of the City’s activity.
Concurrently, there has been a big run up in investment sales values in Manhattan with a projected 24% increase in sales value from 2014 over 2013. Whereas Brooklyn and Queen’s increases were “only” 14% and 5%, respectively, with the Bronx showing a slight 1% drop. This would suggest that there is more upside in borough values, as Northern Manhattan has already witnessed this with a 23% increase.
What I find more interesting is that the average Manhattan building sale in the first three quarters of 2014 was at $1,303/SF compared to the boroughs’ $285/SF. My sense would be that borough rents on average are not a fifth of Manhattan’s.
What is skewing the numbers now are the Manhattan retail sale prices which, in some cases, reach above $10,000/SF. Brooklyn is now having some of their own record price points. Our office just closed on two development sites on Bedford Avenue at $2,500/BSF and $3,200/BSF. These types of sales should narrow the gap.
On the leasing side, it is also clear that in some cases Brooklyn or Queens is the preferred destination for tenants. This was certainly the case for Etsy’s decision to move into 117 Adams Street in the Dumbo Heights neighborhood of Brooklyn. In the same fashion, we anticipate seeing many tech companies looking at LIC due to Roosevelt Island’s new tech campus. Hearing the Bronx Borough President speaking about all the businesses which have relocated to his borough, including IT consulting firm, Doran Jones and online grocer, Fresh Direct, show that there is now appetite citywide.
REBNY has seen this trend and realized the need for more programming in the Boroughs. This has also been at the request of many senior Manhattan based agents whose clients have requirements there.
Although REBNY already has a thriving residential committee there, they established the Brooklyn Commercial Brokerage Committee, having now already had several meetings including ones at RXR’s 470 Vanderbilt Ave. The committee also held their first ever social event at the Brooklyn Winery, which was standing room only.
The next initiative for 2015 will be to establish a Queens Commercial Brokerage Committee. Leadership is already forming with many owners volunteering space for the meetings. After critical mass is established, the Commercial Board of Directors will look to establish a Northern Manhattan/Bronx and Staten Island Committee. Once these commercial brokerage committees are established in each of the boroughs, then sub committees specializing in investment sales, as well as retail and office leasing, might form.
This is, without a doubt, an opportunity for all brokers to exchange business back and forth. Manhattan brokers will undoubtedly refer dozens of assignments that they may not be able to assist with, or cooperate with borough based brokers who can help facilitate. It’s important to remember that REBNY is the largest real estate association that specifically serves NYC, so they have the infrastructure to make this happen.
It is important to remember, however that when REBNY lobbies for real estate and New York City, it affects all the boroughs. Any change to the building code or taxes will have an impact citywide. REBNY has once again shown that it is responsive to all of its members and the City’s needs.