Nonprofits, Education Tenants Offer Hope For Brooklyn Office Revival

In 2019, Brooklyn was positioning itself to be an office hub reserved for the coolest tenants in the world. That year, huge leases were signed by media giants like Netflix and fashion companies like Rent the Runway and Kith.

Developers built more than 6M SF of new office space in the borough over the next three years, increasing the supply of Kings County by more than 10%, according to a Colliers report at the time.

Then pandemic-induced remote work pulled the young professionals meant to fill that space into their homes, and Brooklyn's office market went into a yearslong slump. But this year could mark another turning point.

Brooklyn’s office sector just wrapped one of its best quarters since the onset of the pandemic — thanks to an evolution in what landlords allow their buildings to be used for.

Whereas Manhattan’s office leasing boom has been centered around transit hubs so employees can commute from across the region, Brooklyn's market has shifted to being hyperlocal, focusing on tenants whose customers and occupants come from close by. 

“What developers are working on is an investment in the existing community,” Open Impact Real Estate Senior Vice President Jake Cinti said. “It’s a reason why we’ve been able to get a huge amount of transactions done in some of the [Class-B] buildings.”

In the first quarter of the year, 570K SF of office space was leased in the borough, miniscule compared to Manhattan’s 11.3M SF but quadruple the amount signed in Brooklyn during the prior quarter, according to Colliers. The education sector has led the way, with four of the five largest leases signed by schools. 

That includes Brooklyn Prospect Charter School taking more than 150K SF at The Wheeler, Tishman Speyer’s new Downtown Brooklyn redevelopment, in Brooklyn’s largest lease since the third quarter of 2023. St. Francis College also relocated to the building in 2022.

A school may not have been what one imagines for the ninth through 11th floors of a new Class-A office building, but for a borough with a population surge, such essential services are much-needed, brokers say. 

Brooklyn added nearly 25,000 residents, boosting the population by 1%, between July 2023 and 2024 alone, according to the New York City Department of City Planning. It is expected to grow further as new housing is delivered in areas like Gowanus and Brownsville.

“Just because they're not an employer doesn't mean the building isn't being activated in a positive way,” said Cinti, who specializes in nonprofit leasing. “People are the new amenities, and nonprofits, especially education nonprofits, serve the people.”

However, such use can be costly for a landlord, requiring a substantial build-out, Tri State Commercial Realty founder and President Shlomi Bagdadi said. At the same time, tenant improvements are often packaged into the rent, bringing it up to what a traditional tenant might have paid previously. 

That’s between $40 and $60 per SF, depending on the neighborhood, he said. Buildings that do not require a build-out are priced in the upper $40s per SF.

“If a space that was an education facility goes to the market, it's going to be filled in no time,” said Bagdadi, adding that his firm has recently closed three charter school deals in the borough. “Before we even start marketing it, it's being absorbed.”

Industry City, Sunset Park’s 6M SF campus, signed 333K SF of leases in 2024 — a 5.7% increase year-over-year — and then another 70K SF in Q1. Among its mix, the complex is home to community-focused tenants Fundraise Up, The Marcy Lab School, Blankets of Hope, NYU Langone and the Brooklyn Chamber of Commerce.

“It is its own community, its own neighborhood,” Industry City Senior Vice President of Leasing Jeff Fein said.

Still, Brooklyn has lots of competition with all of the vacant space across the river. Despite robust leasing activity in Manhattan, which has driven down the availability from 18% a year ago to 16% in the first quarter, more than 85.5M SF is still on the market, according to Colliers. In Brooklyn, the availability rate is 21%, with 10.3M SF of supply. 

Tenants in the technology, advertising, media and information sectors, many of which were previously drawn to Brooklyn’s cool factor, have reentered the Manhattan market but have been slow to return to Brooklyn.

“Unless the CEO lives in Brooklyn and lives near where the office is going to be, there's not a lot of interest in Brooklyn,” Wharton Property Advisors President and CEO Ruth Colp-Haber said.

But Brooklyn's status as an emerging market prior to the pandemic has its advantages, too, since it doesn't have as many large corporations that have been shedding space. Unlike Manhattan, where available supply grew 59% after March 2020, Brooklyn’s unleased inventory expanded by just 15%.

“Brooklyn has experienced this incredible rise over the last 25 years,” Colp-Haber said. “Office was never the major focus.”