Brooklyn’s development boom continued unabated in 2014 accounting for nearly a third of the $6 billion in investment property dollars spent in the borough last year, according to Ariel Property Advisors’ Brooklyn 2014 Year-End Sales Report.
More than 9.8 million buildable square feet of development properties (both residential and commercial) traded for over $1.8 billion in 2014, a 28 percent increase in dollar volume from 2013 and an 84 percent increase in dollar volume since 2012.
Prices per buildable foot varied greatly from neighborhood to neighborhood, with the most desirable residential destinations commanding values north of $500 per buildable square foot and a greater portion of neighborhoods now commanding values north of $200 and $300 per buildable square foot.
Major development site sales were primarily clustered in North Brooklyn where developers invested more than $200 million Downtown and nearly $400 million in Williamsburg. Over 80 properties totaling more than 1.25 million buildable square feet traded in Williamsburg, which saw the highest development dollar and property volume in the borough. In nearby Greenpoint, 27 properties with close to 1 million buildable square feet traded for nearly $155 million.
“Parts of North Brooklyn, waterfront areas in particular, are now competing with Manhattan-level prices while neighborhoods further inland are increasingly catching up,” said Daniel Tropp, vice president of Ariel Property Advisors. “The Greenpoint waterfront, for instance, is undergoing a development boom and will undoubtedly become one of the city’s most rapidly-changing neighborhoods over the next few years.”
The sale of a 179,000 buildable square foot site at 161 West Street in Greenpoint for $45.5 million exemplifies this trend. Over 200 condos will reportedly be built on this site, which is south of Greenpoint Landing where about 5,500 units in 10 towers are planned.
Last year, investment dollars for smaller development sites also poured into three neighborhoods where demand for multifamily properties is high—Crown Heights, where 21 development sites traded for $96 million; Bedford-Stuyvesant, where 39 development properties traded for $89.6 million; and Bushwick, where 33 development properties traded for $48.9 million.
“Demand continued to push up land values in Crown Heights, Bedford Stuyvesant, and Bushwick, which is a testament to their evolution into mature residential markets,” saidJonathan Berman, vice president of Ariel Property Advisors. “One illustrative trade occurred at 1036 Dean Street, which sold for $17.5 million, or $230 per buildable square foot as-of-right, without an inclusionary housing bonus.”
However the largest development transaction in the borough, albeit for commercial use, was the purchase of a 300,000-square-foot development site at 169-225 3rd Street in Gowanus for $72.5 million, which equates to roughly $242 per buildable square foot.
“While investment opportunities in the borough have grown tremendously, the potential for additional growth and development remains high with rezoning discussions on the table for areas such as Gowanus and East New York,” said Mark Spinelli, vice president of Ariel Property Advisors. “Gowanus is witnessing increased demand for development because of its proximity to prime residential markets, such as Carroll Gardens and Park Slope, as well as the success of larger retailers such as Whole Foods.”
Brooklyn’s multifamily sales accounted for a majority of the borough’s commercial real estate transactions during 2014. With 856 transactions consisting of 1,040 properties, multifamily properties were responsible for more than half of the investment dollar volume in Brooklyn during the year. Year-over-year, the average cap rate compressed 79 basis points to 4.96 percent in 2014. Additionally, the average gross rent multiple jumped by nearly more than 2.0 points to 13.28.
One notable multifamily transaction was 100-116 South 4th Street, a 77-unit rental building in Williamsburg that sold for $52 million, equating to roughly $660 per square foot and over $675,000 per unit. Another notable sale was 39 Waverly Avenue, a 126-unit rental building in Clinton Hill, which sold for $68 million, and represents a price per unit of over $550,000.
The Brooklyn 2014 Mid-Year Sales Report tracks all development, multifamily, industrial, and other commercial property sales over $850,000 and is available a thttp://arielpa.com/newsroom/