Marcus & Millichap's Jakub Nowak On The Brooklyn And Queens Redevelopment Frenzy
Brooklyn and Queens have experienced tremendous population growth over the past several years, and according to Marcus & Millichap commercial broker Jakub Nowak, the resulting swell in multifamily development is now "trickling down" to retail and office. Given the 15-fold increase in the sales numbers for Bushwick industrial properties in just the last year, "trickling down" seems like modesty on Jakub's part. Maybe "flooding."
Approximately 240,000 newcomers made Brooklyn and Queens their home within the past five years, based on the latest US Census Bureau report. Their arrival created a surge in demand for commercial space and drove rents for existing retail, office and creative spaces in these submarkets to historic highs. Consequently, developers have been snapping up industrial buildings in strategic locations. Jakub says their plan is to repurpose these spaces for retail and creative office uses, and in doing so, "preempt the eventual need for bottom-up construction in those growing peripheral areas."
According to Jakub (who consistently ranks as one of Marcus & Millichap’s top industrial brokers nationally), properties along the peripheries of growing retail corridors and multi-story former manufacturing facilities near transportation are seeing the most interest from investors.
“Many of these assets can be purchased below their replacement cost and offer wide-open floor plates with high ceilings and unique character, all of which are popular with commercial tenants moving into the outer boroughs,” Jakub says.
The repurposing of all these former warehouses and factories is driving the values for the remaining industrial sites through the roof, creating an "extremely supply-constrained environment" for manufacturing and distribution businesses.
Exploding demand for industrial redevelopment in these areas has been a main area of focus for Jakub and his team, which specializes in industrial investment sales in Brooklyn and Queens. Some of their recent sales include the corner of Atlantic Avenue and Franklin Street in Brooklyn, a two-story auto shop to retail conversion at a price of $404/SF and a two-story warehouse to office redevelopment at 25 Quincy St for $426/SF.
"Traditionally, a lot of these spaces have been thought of in a vacuum of industrial uses," Jakub says. "You really can't think of them that way anymore. These properties are constantly being affected by ongoing development around them. The first thing we do when pricing an industrial asset is determine its highest and best use in light of the local area dynamic."