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Summer 2021 Brooklyn Retail Report
September 23, 2021
Leasing in Brooklyn's retail sector has steered a steady course during the last six months. Brokers noted robust demand for second generation space, as retailers remain eager to capitalize on the reduced buildout costs associated with fully-built space. Increased activity among national retailers and some direct-to-consumer brands has heightened competition in select areas. Some locations are even receiving multiple bids.
Despite the growing demand, asking rents are still adjusting in many corridors. Pricing discovery is elusive. In a few locations, the depletion of second-generation space has left the corridor with more higherpriced spaces in newer buildings. In other corridors, the addition of fully-built space has pushed rents lower. If leasing momentum is maintained, rents could stabilize in the second half of 2021.
The outlook for the next six months is promising, but uncertainty still looms. In particular, brokers share justified trepidation about potential obstacles such as the surge in the Delta variant of COVID-19. Additionally, turnover in New York City and State government is spurring concerns about the potential for unexpected regulations that could hamper or delay business formation and leasing. Assuming these obstacles are kept in check, strong demand from retailers should propel leasing momentum.
Even if leasing activity is sustained, it will take more time for rents to stabilize. Retail corridors with very little second generation space remaining may register a short-term decline in leasing. It remains to be seen if tenants will commit to newly built space in multi-family and new boutique properties. These will command higher rents as well as elevated buildout costs for both the tenant and landlord.