CBRE Reports on "Booming Brooklyn: Office and Retail Outlook"
New York, NY – (October 15, 2015) – CBRE Group, Inc. reported today on the state of Brooklyn’s fast-growing office and retail real estate landscape. The company introduced its quarterly Brooklyn MarketView, which provides an in-depth analysis of the borough’s commercial real estate scene, with the third quarter 2015 edition highlighting DUMBO.
In tandem with the release, a panel of CBRE Brooklyn experts came together at DUMBO Heights to discuss the changing dynamics of the borough.
“Brooklyn’s office market is expanding due to the concentration of creative talent living in the borough as well as landlords investing in the necessary capital improvements to make their buildings compelling for creative companies looking to relocate into Brooklyn,” said Frederick Fackelmayer, senior vice president, CBRE, who negotiated Etsy’s 225,000-square-foot office lease at DUMBO Heights, Brooklyn’s largest tech office deal on record.
“Brooklyn’s growth as a major New York City office market has evolved over the last 10 years,” said Keith Caggiano, senior vice president, CBRE, who has represented tenants and landlords in the market for more than a decade. “Once dominated by back-office requirements for primarily financial services firms, the tenant diversity now closely resembles Manhattan, with all major segments of New York’s economy well represented.”
“Due to increasing tenant demand and the lack of attractive investment opportunities in Manhattan, institutional-quality office developers that had never been active in Brooklyn are breaking ground on projects across the East River,” said Sacha Zarba, executive vice president, CBRE. “Developers such as Kushner Companies, RFR Realty, Invesco and LIVWRK at DUMBO Heights, Tishman Speyer in Downtown Brooklyn and Boston Properties and Rudin Management at the Navy Yard have all put down stakes in an effort to attract creative companies with premier space at competitive rents, aided in part by REAP benefits.”
“As office leads the charge, retail is attempting to catch up in the historically under-served borough,” said Lon Rubackin, senior vice president, CBRE Retail. “Retail tenants are having to deal with emerging retail neighborhoods like DUMBO and Downtown Brooklyn that have asking rent spreads as wide as $50 to $400 per square foot, making entering the market complicated.”
On the office side, according to CBRE’s Brooklyn MarketView, the DUMBO submarket has the borough’s highest average asking rent and availability rate. This is driven by the 242,200 sq. ft. of available space at Empire Stores, where asking rents range from $65 per sq. ft. on lower floors up to $85 per sq. ft. on upper floors, as well as availabilities at DUMBO Heights.
* * * In assessing the Manhattan office leasing market, CBRE reported Manhattan overall availability at 10.3%, a seven-year low, following one million sq. ft. of positive absorption. Midtown average asking rents were at $77.89 per sq. ft., which was on par with mid-2007 levels, while Midtown South availability dropped to 7.9%, its lowest level since first quarter 2001, and Downtown leasing activity was 1.38 million sq. ft., 60% over the previous quarter, as larger deals close in anticipation of the year’s end.
MIDTOWN – Leasing activity totaled 3.64 million sq. ft. in Q3 2015, 9% below its five-year quarterly average. Year-to-date leasing activity totaled 13.66 million sq. ft., up 8% compared to the same period last year. The availability rate fell 30 basis points (bps) over the past three months and 60 bps from one year ago. Year-to-date net absorption remains negative, but improved by 642,000 sq. ft. during the quarter. The average asking rent increased $0.14 over the quarter and is up 4% from Q3 2014. Sublease availability fell 30 bps to 1.8% quarter-over-quarter, with an average asking rent that increased 3% over the same period to $63.37.
MIDTOWN SOUTH – Leasing activity totaled 1.48 million sq. ft. in Q3 2015, 13% above its five-year quarterly average. Year-to-date leasing activity totaled 4.52 million sq. ft., down 12% compared to the same period last year. The availability rate fell 30 basis points (bps) over the past three months and 150 bps from one year ago. Year-to-date net absorption remains positive and improved by 214,000 sq. ft. during the quarter. The average asking rent increased by $0.50 over the quarter and is up 6% from Q3 2014. Sublease availability rose by 30 bps to 1.6% quarter-over-quarter, with an average asking rent that fell 9% over the same period to $54.97.
DOWNTOWN – Leasing activity totaled 1.38 million sq. ft. in Q3 2015, 5% above its five-year quarterly average. Year-to-date leasing activity totaled 3.39 million sq. ft., down 34% compared to the same period last year. The availability rate fell 10 basis points (bps) over the past three months, but is up 20 bps from one year ago. Year-to-date net absorption remains negative, but improved by 149,000 sq. ft. during the quarter. The average asking rent decreased by $0.51 over the quarter, but is up 12% from Q3 2014. Sublease availability rose 10 bps to 1.4% quarter-over-quarter, with an average asking rent that rose 2% over the same period to $45.03.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.