The Best Neighborhoods To Turn A Profit In Brooklyn Right Now
Investors have flocked to Brooklyn in the past decade, pushing prices to new heights and spurring a flood of commercial and residential construction.
Now there is a rental glut and fears of a major oversupply of office space. Last year, investment sales dollar volume in the borough hit approximately $6.3B, down nearly 20% from the year before, according to TerraCRG’s Brooklyn Brooklyn 2017 market report.
But there is still plenty of value in the borough, developers and brokers told Bisnow, in the right places. Places like South Williamsburg, which does not rely on the soon-to-be-shut-down L train, along with Fort Greene and Greenpoint, are still seen as great value. Buildings that offer new, high-quality office space or provide a service or facility that the area is lacking are in high demand.
“The market, by historic standards, is still very strong; prices did not go down [last year] at all,” said TerraCRG founder Ofer Cohen, adding that the neighborhoods of Kensington, Prospect Lefferts Gardens, Prospect Park South and portions of East Flatbush are where his brokers are spending much of their time.
Developers believe those places still have significant value because they are well-served by subway lines.
“That area has been a sleeper for the Brooklyn boom,” he said. “In the last two or three years, residents that have been priced out of other neighborhoods are moving there."
Charney Construction & Development principal Sam Charney believes neighborhoods like South Williamsburg, Greenpoint and Fort Greene are still undervalued.
“Anywhere you can be close to multiple train lines [is a good place to acquire],” he said. “If you look at Fort Greene relative to other classic Brooklyn neighborhoods — places like Cobble Hill and Carroll Gardens — it’s got great transportation, it’s got its own park. There’s still a lot value in my mind.”
Charney’s company is joining with Tavros Capital Partners to develop the Dime, a former Dime Savings Bank on almost an acre in South Williamsburg. Once complete, the development will feature 178 rental units, 100K SF of office space and a 55K SF of ground-floor retail.
“I’m a transportation-based developer, which is why I went for the Dime,” he said, noting its proximity to the J, M and Z lines when the L train shuts down next year will be incredibly valuable.
Some developers are going further afield in the borough, throwing money at far-flung locations like Coney Island.
John Catsimatidis’ Red Apple Group is planning a 440-unit development at 3514 Surf Ave. called Ocean Dreams that will feature its own trolley service to the subway.
Cammeby’s International is also developing a mixed-use building at the site of the Trump Village Shopping Center on Neptune Avenue, and Taconic Investment Partners reportedly wants to build 1,000 units in the area.
Meanwhile, Muss Development and AvalonBay Communities built a residential building in Sheepshead Bay, with condominium closings imminent, according to the company. But Rubenstein Partners Senior Adviser of Brooklyn Jeremiah Kane thinks Brooklyn’s waterfront still offers value.
“Although it is finite, there are still pockets of opportunity,” he said. “We’re still bullish on it … pricing is still high, [but] the rents for those waterfront markets means it makes sense.”
Rubenstein Partners is joining with Heritage Equities Partners to develop 25 Kent Ave., an office/retail and light industrial building spanning 500K SF.
The building is not yet leased, but Kane said he is optimistic about its prospects. There has been concern over the amount of office space in Brooklyn's pipeline, but he thinks absorption is moving at a good pace.
“When you start to dig into the market a little … things that are well-executed and well-designed are doing very well,” he said. “It’s very much a ‘show me’ market. You have to demonstrate that you are committed.”
Others believe the best way to get ahead in Brooklyn comes down to focusing on what certain areas are lacking.
“When you go into these emerging markets, you need to look at what the needs are in the community," Daren Hornig said.
His firm, Hornig Capital Partners, is joining with Brickman to turn a building at 1519 Decatur St., on the border between Bushwick and the Queens neighborhood of Ridgewood, into a music venue.
The New York City Department of City Planning’s Brooklyn Office Director Winston Von Engel said it is crucial developers listen to the concerns of the communities they invest in.
“In many of these hot neighborhoods, there are people who have been living there for a long time who are responsible for the so-called 'Brooklyn brand,'” he said. “It would be wise for any developer to work with those folks.”
Learn more about the next wave of Brooklyn's growth at Bisnow's Brooklyn New Frontiers event March 7 at the William Vale Hotel.
CORRECTION, FEB. 28, 5:18 P.M. ET: Muss Development and AvalonBay Communities have developed 1 Brooklyn Bay, a 30-story residential building in Sheepshead Bay. An earlier version of this story stated it was not yet built. The story has been updated.