By Konrad Putzier
2015 is shaping up to be the year of records in Sunset Park — a formerly neglected neighborhood that is now emerging as Brooklyn’s latest boomtown.
Eastern Consolidated has just sold a 12-unit rental building on Fourth Avenue for $373 per s/f, claiming a record price for multifamily buildings in the neighborhood.
The buyers, two unnamed investors, dished out $3.75 million for the 9,592 s/f property. “The property is right in front of the subway,” said Eastern Consolidated’s Andrew Sasson, who brokered the sale. “The whole area is slowly changing, and there’s a lot of upside in residential rents.”
The deal comes less than a month after the announcement that Bed, Bath and Beyond signed a 100,000 s/f lease at Sunset Park’s Liberty View Industrial Plaza — Brooklyn’s largest retail deal of 2014.
The two deals highlight Sunset Park’s transformation into a real estate investment magnet.
In past years, the neighborhood – nestled between Park Slope, Bay Ridge, Borough Park and the Upper Bay – was rarely mentioned in gushing reviews about Brooklyn’s real estate boom. At best, it was seen as a dusty frontier market with ample manufacturing space and Jamestown Properties’ Industry City as a poster child.
But now, the borough is growing beyond manufacturing. The average home price rose by 17 percent year-over-year to $771 in the fourth quarter of 2014, according to REBNY. Prices in the more prominent neighborhoods — Dumbo, Fort Greene, Gowanus and Brooklyn Heights — grew at a slower pace during the same period. Commercial investment sales in Sunset Park reached a total of $482 million in 2014, according to Ariel Property Advisors.
Brokers discern a number of reasons for Sunset Park’s emergence. The most obvious one is simple contagion, especially in the residential market: As prices become unaffordable in Park Slope or Williamsburg, buyers and renters migrate south.
But there are also factors unique to Sunset Park that explain its rise.
One is its strong manufacturing sector. Timothy King, a broker and co-founder of CPEX Real Estate who arranged the Bed, Bath and Beyond lease, describes Industry City as “a tide that lifts all boats”.
Along with nearby manufacturing parks such as Liberty View and the Brooklyn Army Terminal, it attracts foot traffic and drives up retail rents. It also leads to increased demand for apartments.
“Industry city is attracting a lot of creative jobs and people that are coming into the neighborhood and want to live here,” said Sam Shalumov, an associate vice president at TerraCRG.
Rising demand for apartments is driving real estate investment. Shalumov said his team recently sold two multifamily buildings on 7th Avenue for 13.5 times the rent roll — traditionally sales in the neighborhood went for 10-11 times the roll. He added that investors are now regularly buying at a five-percent cap rate, another novelty and a sign of confidence in the market’s continued growth.
Chinese investment is accelerating the trend. Sunset Park’s southeastern corner is home to Brooklyn’s Chinatown, which attracts plenty of foreign investment. Shalumov said he has seen a marked increase in Asian investment. Typically, he said, these buyers scoop up six-unit buildings – often to house their families. They also tend to pay a lot more than locals, further driving up prices.
On the retail side, Sunset Park has one crucial advantage over most other parts of the city: space.
“It’s very difficult to find a floor plate of 120,000 s/f in the five boroughs,” said Timothy King, explaining why Bed, Bath and Beyond chose Sunset Park.
The neighborhood is already home to an enormous Costco store, and King explained that he has a further 30,000 s/f of retail space available at Liberty View Industrial Plaza.
Adding up ample retail space, Asian investment, booming manufacturing employment and comparatively cheap real estate prices should give reason for optimism that Sunset Park still has plenty of room to grow.