Downtown Brooklyn has doubled the number of residential units permitted or under construction since 2004. As the development boom accelerates, so do the hurdles. Here are four key challenges to building in the borough.
1. Transportation
Subway infrastructure is geared toward getting folks from home in Brooklyn to work in Manhattan, which doesn’t always jibe with transit access to big office projects like Industry City in Sunset Park, according to panelists at our Brooklyn’s Hot Projects and Neighborhoods event Wednesday at the Barclays Center. And it goes both ways: Industry City director Kathe Kramer Chase, a panelist, says it takes the workers who live in North Brooklyn longer to get there than those living in Manhattan. As RedSky Capital principal Benjamin Bernstein (snapped above, right) points out, folks who could afford Manhattan now choose to live in Brooklyn for its cultural appeal and vibe. And with projects like LIVWRK’s Dumbo Heights, which is bringing 1.2M SF of new office space to Downtown Brooklyn, more residents are working there too.
2. Lending
LIVWRK founder and CEO Asher Abehsera says he relies on crafting "a really good narrative” about a project when looking for financing. LIVWRK, with Kushner Cos, recently closed on a $275M buy of 184 Kent Ave, a 338-unit converted rental building on the Williamsburg waterfront. He said while he thought any gaps that remain along the waterfront development boom would be filled in, there will be a couple of cycles before that happens and financing will be a hurdle to clear as lenders get used to throwing down for projects in Brooklyn.
3. Parking
Slate Property Group principal David Schwartz (snapped above with Megalith Capital principal Philip Watkins) says parking requirements affect how many units we can build and how much space is available for retail. Of the six apartment buildings Slate’s developed in Williamsburg, David says, at least half the parking spots go unused. “Williamsburg shouldn’t have the same parking requirements that Sheepshead Bay has,” David says. With land prices in Brooklyn sometimes running upwards of $400/SF, unused parking can cut into ROI on a project.
4. Affordable Housing
A change to the 421a tax abatement program is needed, said panelists, as the June 15 deadline for new projects using the program looms. Cayuga Capital Management principal Jacob Sacks says land costs are so high that only two strategies really make sense: pay a lot for prime land and build all market-rate condo units, or pay a lot less in a less-desirable area and build all affordable units. Jacob pointed out that 425,000 new jobs came to the city over the last five years and most of them are in the TAMI sector. He says those young tech workers who can’t afford a $5,000 one-bedroom—but want to live in a hip ‘hood—can’t move into some of the new product being built. "What happens is developers like us can't get any residential rental housing built," he says. Jacob proposes a tweak in 421a to require 75% market rate and 25% affordable units, plus an immediate 25% property tax hike on new rental projects. That could help the city reach its goal of 200,000 new affordable units and let developers get the tax break that makes it worth it to pay so much for land.
Here we snapped the sellout crowd of 250 packed into the 40/40 Club at the Barclays Center for our event. Three panels covered development in Williamsburg, the waterfront and Downtown Brooklyn. Folks stuck around for cocktails and everyone at the event got a ticket to the Brooklyn Nets game.
Here’s the waterfront panel: TerraCRG VP Dan Marks, Megalith Capital principal Philip Watkins, Industry City director Kathe Kramer Chase; LIVWRK founder and CEO Asher Aberhsera, Brooklyn Navy Yard Development Corp president and CEO David Ehrenberg, and Baker Hostetler counsel Nicolas Melillo, who moderated.
We also snapped our Williamsburg panel: Tarter, Krinsky & Drogin counsel Charles Pierce, who moderated, Apts and Lofts founder and CEO David Maundrell, Slate Property Group principal David Schwartz, Eastern Consolidated director Gabriel Saffioti, RedSky Capital principal Benjamin Bernstein, and Cayuga Capital Management principal Jacob Sacks.
Our Downtown Brooklyn panel: Rosenberg & Estis member Jason Davidson, who moderated, Muss Development principal Jason Muss, CPEX managing director Sean Kelly, Forest City Ratner VP Swetha Subramanian, Stahl Organization VP Roger Fortune and Washington Square Partners managing director Paul Travis.
