By Roland Li
Downtown Brooklyn is on its way up.
As one of the city’s largest business districts, the neighborhood had always served a vital role, housing large corporations and the borough’s major government agencies. But in the last decade, the area has been transformed by a residential boom and an influx of new retailers.
The Downtown Brooklyn Partnership, the local business improvement district, was established in 2006 in the wake of a 2004 rezoning by City Planning, in order to promote commercial and residential life in the area.
Its efforts appear to have paid off. According to a recent report from the Partnership, the local business improvement district, 2010 saw store openings, leases and new construction activity at over 721,000 s/f of retail space in the area’s central business district. Additionally, 4,000 new residents moved to the area in 2010, and the population in the district has spiked from 400 residents in 2000 to a current total of around 12,000 people.
The growth has been explosive, and particularly impressive in the midst of a global economic downturn that saw a freeze on most construction projects and sharp cuts in government funding and real estate spending. But the numerous residential buildings have survived the downturn, often emerging with a robust amount of units sold or rented. The types of buildings that have been built have also transformed the area, bringing large towers with upscale amenities that evoke, often intentionally, the heights of Manhattan.
The Brooklyner at 111 Lawrence Street, the tallest building in the entire borough, is almost 97% leased, according to Brian Collins, the vice president of operations of Equity Residential, one of the building’s developers. (Equity had partnered with the Clarett Group, which has reportedly closed its New York office, and currently Equity is solely responsible for the leasing at the Brooklyner.)
“We do feel that downtown has been emerging and will continue to emerge,” said Collins. “We think that it will get better and better.”
In an encouraging sign for Equity, many residents are choosing to renew their leases, often despite significant rent increases. Studios at the Brooklyn start around $1,900 per month, one bedrooms at $2,400 and some two-bedroom apartments are over $3,000 per month. The Brooklyn currently has around a 60% retention rate as leases come up for renewal, said Collins.
Equity was seeking to bring Manhattan-style amenities to the neighborhood, including floor-to-ceiling glass in some rooms, valet parking, a 24-hour doorman and entertainment lounges. And although the Brooklyner came on the market during the recession, activity remained brisk.
“From a leasing standpoint, getting folks in the door, it was fine,” he said. “There’s more people who desire to live in Brooklyn.”
Condos have also seen much activity, weathering some price decreases during the recession.
The Toren, which features a distinct blue façade designed by Skidmore, Owings & Merrill, has sold 165 of its 240 units, or around 70%. The building, at 150 Myrtle Avenue, includes 42 moderate income units and is also certified LEED Gold.
“Thirty years ago, people used to move here because they couldn’t afford Manhattan,” said Roberta Benzilio, executive director of sales in Brooklyn for Halstead Property, who oversees sales at the Toren. “Now people move here, because they really want to move here.”
As part of the rise in demand in Downtown Brooklyn, condo prices have risen, although they are still less than some Manhattan neighborhoods.
The Toren’s moderate income one-bedroom apartments start at $440,000, while standard one-bedrooms start at $475,000. Two bedrooms start at $464,000 for moderate income and $675,000 for market rate. Three bedrooms start at $995,000. The prices averagely roughly $700 per s/f.
“The prices really held,” said Benzilio. “Even as the market started to correct”
Fifteen units were discounted in the Toren during the recession, and 11 of those apartments have since sold. It also offered concessions to buyers for transfer taxes, a common practice among the new developments, said Benzilio.
At the Oro, a 303-unit condo at 306 Gold Street, the building is now 70% sold, according to Edward Azria, manager of sales at Rose Associates, the Oro’s broker.
“The location is just what beat out everything,” he said.
Sales began in 2007 and closings in 2008, with construction finishing that year. The downtown led to some price discounts on some units. Crain’s reported in 2009 that some prices were cut by as much as 25%.
The majority of the buyers have been Brooklyn residents, but Manhattan, Westchester and New Jersey newcomers have also settled in the area.
The Oro includes a swimming pool, sauna, half basketball court and two floor gym – amenities that did not exist in the neighborhood, prior to the latest round of development.
On the bottom floors of the Oro is a wine store and All State insurance office, and fittingly, Downtown Brooklyn’s residential surge has been mirrored by an equally dramatic transformation of retail.
“Now, there’s a new wave of additional retailers looking at the street,“ said Barry Fishbach, an executive vice president of Robert K. Futterman & Associates and outer boroughs retail veteran. “Where there was once parking lots, now there are buildings.”
Fulton Street in particular has changed from a collection of dollar shops to national retailers like Foot Locker and Radio Shack, as well as boutique apparel stores and new restaurants.
Fishbach completed a deal for Shake Shack’s lease for around 2,500 s/f on Fulton Street. He has also worked with PetSmart, Aéropostale and GameStop.
Although Fishbach said retail rents are still down on Fulton Street compared to five years ago, because of the recession, they have been creeping up, starting at around $100 per s/f on some streets and exceeding $200 per s/f in prime locations.
The presence of national chains and high end stores and restaurants will encourage similar tenants to move into the area. However, there are smaller spaces, particularly on side streets, that remain home to more local shops.
“It sets a tone for a retailer,” said Fishbach. He also credited the Downtown Brooklyn Partnership will taking an active role in drawing in new retailers and consulting with existing retailers to drive more business.
Downtown Brooklyn’s greatest assets include its numerous subway lines and Long Island Railroad station, as well as its close proximity to Manhattan’s Financial District, said Timothy King, managing partner of commercial brokerage CPEX Real Estate.
CPEX recently completed deals for Jake’s Wayback Burgers at 125 Livingston Street and Smashburger at Forest City Ratner’s 80 Dekalb. In both cases, it was the first New York location for the chains, and more evident that Downtown Brooklyn has become a retail destination, said King. CPEX is also finalizing a deal for around 20,000 s/f for a big chain on Atlantic Avenue.
King said that the residential and retail growth in the area has been a mutual relationship.
“It’s kind of unique in that a new customer base has been created,” he said. In addition, tourists and thousands of city employees in the government agencies have create additional foot traffic in the area, he said. There are also a number of hotels, including a Sheraton, Marriott and smaller boutique hotels, and an Aloft Downtown Brooklyn is also in the works.
In the office market, City Planning reported 11 million s/f of local office space in 2004, and the area has not seen a large amount of new office supply, in contrast to the residential surge. Office vacancy rates are low, said King, and large companies would be hard-pressed to find enough space. Similarly, the investment sales market has a lack of supply and a surplus of capital, making vacant land a premium.
There is also a strong institutional presence in the area.
“To an extent, Downtown Brooklyn is a college town,” said King.
The neighborhood’s numerous schools include Brooklyn Law School, Long Island University, New York City College of Technology, and Pratt Institute. The Downtown Brooklyn Partnership says that 57,000 students live in the area.
The region’s major engineering school, now known as the Polytechnic Institute of New York University, has major development plans in the next decade.
As part of its 2031 expansion plan, N.Y.U. plans incremental growth in the area over five to seven years in the area. The plans coincide with a $50 million renovation of Polytechnic, including a new “Campus Walk” open space area that will connect academic buildings and residence halls. The school is also exploring potential use of air rights for new development, which could total up to 1 million s/f. Some of N.Y.U.’s existing academic programs and other services could eventually be located in Brooklyn, according to university spokesman John Beckman.
A number of public spaces are being developed by the city, including CityPoint, Albee Square, Willoughby Plaza and the $23 million Flatbush Avenue Streetscape. Forest City Ratner’s controversial Atlantic Yards project will also add thousands of new residents and Brooklyn’s first professional sports team since the Dodgers moved to Los Angeles in 1957. Atlantic Yards will be, as CPEX’s King puts it, the “icing on the cake.”
“I’m so excited that Brooklyn is finally becoming the metropolis that it should be,” said Benzilio of Halstead. “It’s not a second choice or where people are settling.”