Brooklyn’s Thriving Residential Market Driving Demand
NEW YORK, NY – The Real Estate Board of New York (REBNY) today released its latest Brooklyn Retail Report focused on market findings gathered in Winter 2022. Retail activity has remained strong despite recent challenges presented by supply chain issues and labor shortages, and the market tightened in most major corridors during the last six months. Read the report here.
Of the 17 major Brooklyn retail corridors analyzed for this report, 10 saw average asking rent per square foot grow from Winter 2021 to 2022. Even with some increase in rent, asking rent is below its pre-pandemic peak in 16 of the 17 corridors. The report notes for example, that asking rent on Fulton Street in Downtown Brooklyn is 45% below its peak of $359 in Winter of 2018.
Corridors with strong demand from Brooklyn’s expanding residential sector continue to outperform those that are more dependent on daytime commuters or tourism.
More than 14,000 residential units have been completed since 2020 in Brooklyn and nearly four times that amount is either proposed or in the planning process. Local retailers have depleted availability in several residential neighborhoods, including Franklin Street in Greenpoint, Court Street in Cobble Hill and some sections of Park Slope. Average asking rent on Franklin Street jumped to $88 per square foot (psf) in the last six months – just below its recent peak of $89 a year ago. Franklin Street is still a fraction of the $200-plus rent seen in Williamsburg and some sections of Downtown Brooklyn.
With limited space options on Franklin Street and Court Street, retailers are taking a closer look at secondary streets such as Manhattan Avenue and Smith Street. Asking rent on Manhattan Avenue rose to $69 but is still 8% below its pre-pandemic high.
While local businesses are driving demand in much of the borough, national retailers and direct-to-consumer innovators continued to focus on Williamsburg, leaving North Brooklyn vacancies low. Williamsburg’s North 6th Street registered the highest average asking rents in the borough at $225 psf in Winter 2022.
Office and tourist-dependent corridors such as Downtown Brooklyn and Montague Street have more vacancies. Turnover among national retail chains on these corridors as well as Bay Ridge’s 86th Street has kept rental rates in check. Extensive residential development on streets such as Fulton Street will help diversify retail demand drivers. Over 100,000 square feet of commercial space is being built at 360-370 Fulton Street, along with 421 apartments.
“Brooklyn’s expanding residential base has been an essential steadying force for its retail sector during the ups and downs of the pandemic,” said Keith DeCoster, Director of Market Data and Policy at REBNY. “The borough’s continued economic vibrancy further demonstrates the value of private and public sector collaboration to incentivize development of both strong commercial and residential components within neighborhoods across the city.”
Brokers expect leasing to pick up this spring and summer thanks to several tailwinds, such as renewed tourism and rising office occupancy rates.
“The appetite for space from tenants this spring feels like it's greater than even before the pandemic in more established sub-markets like Williamsburg, Dumbo and Downtown Brooklyn. This is especially so with the completion of multiple large-scale residential projects producing thousands of units and the most recent announcements from major brands like Interior Define, Google, and Patagonia,” said Founder & CEO of Tri State Commercial Realty Group, Shlomi Bagdadi. “This developing trend aligns with our predictions from back in the second half of 2021 for the next 12-18 months. Since we've already seen price increases and vacancy rates decrease in most of Brooklyn's sub-markets north to southeast to west, we will likely continue to witness this trend per square foot as interest rates and real estate taxes continue to climb together with a healthier retail market.”
“The Brooklyn leasing market continues its steady rebound led by food & beverage concepts, and fewer availabilities are finally translating to higher pricing in many corridors,” said Peter Schubert, Managing Director of Commercial Leasing at TerraCRG. “We also see very good absorption of M-1 and M-2 space, suggesting strong demand for locally-produced food & beverage.”
REBNY’S Biannual Brooklyn Retail Report is a joint effort by the REBNY Brooklyn Retail Advisory Group and the REBNY team. The report provides a snapshot of major retail corridors in the borough based on available ground-floor retail asking rent information. All data is sourced from the respective firms of each REBNY Brooklyn Retail Advisory Group member. The report includes the average price per square foot, median price per square foot, the lowest price per square foot, and highest price per square foot for each of the 17 retail corridors tracked.