Retail rents are surging in popular Brooklyn neighborhoods where new residential development is expected to push the sector to a “tipping point” that will see more national brands enter the borough.
“As new shops are introduced to the area, a new different style of shopping and different style of demographic is coming into the area,” said Justin Fitzsimmons, a research analyst at GFI Realty which just released a report on retail in Brooklyn.
“We’re seeing Banana Republic, Gap, Shake Shack, Dekalb Food Market – the correlation we found is that a strong residential pipeline is boosting this retail.
“National retail is struggling nationwide as far as competing with online commerce and retailers are adapting to online commerce. And Brooklyn seems to be kind of bucking that trend.”
GFI Realty Services studied four neighborhoods in Brooklyn where there is a high amount of residential construction taking place — Boerum Hill/Prospect Park, Downtown Brooklyn, Greenpoint, and Williamsburg.
The report pointed out the correlation between residential strength and retail growth, especially in the midst of a nationwide retail slump.
In Greenpoint, Williamsburg’s neighbor to the north, there are 10,000 residential units set to come online by 2019. Asking rents on one of the main shopping corridors in the neighborhood have skyrocketed 42 percent in the past year.
On Greenpoint’s Franklin Street, one of the busiest streets in the neighborhood, asking rents for ground-floor retail space between Meserole Avenue and Commercial Street rose 42 percent year-over-year in the first quarter, going from $63 to $89 psf.
Downtown Brooklyn, which is expected to complete 5,000 new residential units by 2022, had the most expensive retail corridor in the first quarter of 2017 along Fulton Street. The retail area bordered by Flatbush Avenue and Boerum Place saw rents increase by eight percent – going from $300 psf last year to $325 psf his year, surpassing Williamsburg’s Bedford Avenue as the most expensive retail corridor in Brooklyn.
Other national retailers have inked deals in Downtown Brooklyn, including Apple and Whole Foods’ 365 market. “I think that retail definitely still has room to grow,” said Fitzsimmons. “As the national retailers come in, prices will keep rising. As far as rental and condo prices, we expect them to stay at least steady if not rise.”
Mitzi Flexer, a retail broker in Cushman & Wakefield ’s Brooklyn office, said the Court Street shopping corridor in Cobble Hill, not far from Downtown Brooklyn, has been flourishing lately, feeding off some of the bigger retailers near them like SoulCycle and Neiman Marcus Last Call, both near Borough Hall. National retailers such as Bonobos, Jacadi, and Benefit have opened recently on Court Street, which is now getting above $150 p/s/f in rent, said Flexer.
“Spaces are filling on their own because Brooklyn is such a hot market,” she said. “A lot of landlord agencies, a lot of the tenants come to us, and we make calls and everybody wants to be in Brooklyn.”
And it’s not just national retailers that want to be in Brooklyn. Flexer mostly does landlord rep, but one tenant that she represents is a independent, family-owned, organic grocery store that is looking for another space in Brooklyn. When she reached out to brokers and landlords about the tenant, she said the response was overwhelming.
“Everyone from big developer to smaller landlord had a space for this tenant,” said Flexer. “I think four years ago, if a tenant like this was in the market, people were shying away from it. They wanted a bank, a gym, a pharmacy — now they realize what a great addition a really good grocery does for the neighborhood.”
Meanwhile, on Williamsburg’s Bedford Avenue, one of the most expensive shopping corridors in Brooklyn, retail asking rents declined year-over-year in the first quarter of 2017, led by the looming L train shutdown and oversupply of space.
“It hasn’t stopped developers from moving forward, but I do believe it’s a factor for national retailers coming into the area,” said Fitzsimmons. “We have kind of a market that is oversaturated with pricey retail spaces.”