Brooklyn Dollar Volume Dropped Nearly 20% Last Year

Just like the rest of New York City, investment sales in Brooklyn took a significant hit last year. But there were some bright spots, with retail, office and industrial markets experiencing gains amid the overall slump.

In total, investment sales dollar volume in the borough hit approximately $6.3B in 2017, a roughly 19% decrease from the year before and around a 40% drop from 2015, according to TerraCRG’s 2017 Brooklyn market report, released Tuesday morning. The number of transactions hit 1,359, a 10% year-over-year drop.

Conversely, the dollar volume for retail sales jumped by 23% to hit $349M. The industrial/office market had a record year, with dollar volume increasing by a whopping 52% year-over-year from $787M to $1.1B.

“We’re sort of back to the same level that we saw in 2013 and 2014,” said TerraGRG founder Ofer Cohen of the overall Brooklyn market. “2016 and 2017 felt slow, but when you look at the macro, it’s a very healthy, stable, strong market."

He pointed out that, even though dollar volume took a hit, transaction numbers are relatively stable, and annual sales volume has increased significantly over the past eight years. In 2010, investment sales dollar volume in the borough was around $1B, he said, compared to almost $10B at the peak of the market in 2015.

Last year, Brooklyn multifamily sales dollar volume dropped by around 39% from 2016 to hit $1.63B. The number of transactions fell by around 100, but price per SF and price per unit increased.

The priciest multifamily sale of the year was for 7 Dekalb Ave., which sold to BFC Partners and the Brodsky Organization for $96M. TerraCRG partner and leader of the Multifamily Investment Sales Division Adam Hess said the fact that price per SF and price per unit did not drop suggests a market correction.

“Owners and buyers are in the process of trying to find an equilibrium where transactions make sense with higher interest rates and what sellers can capitalize on,” he said.

In the mixed-use asset class, the total dollar sales volume hit $901M, a fall of 21% year over year. However, according to TerraCRG’s report, the average price per SF went up in most areas, with notable increases in emerging neighborhoods. Prospect Lefferts Gardens, for example, increased 19% in price per SF. And despite the imminent closure of the L train, Williamsburg mixed-use price per SF went up by 12%.

The number of residential development sites sold decreased 38% year over year to hit $1.01B. The most expensive development site that changed hands was 633 Fulton St. in Fort Greene, which sold for $68M last May.

But retail assets performed well, despite worldwide gloom about the future of brick-and-mortar stores. The average retail transaction was $3.63M, with the priciest deal at 60 North Sixth St., which went for $19.8M.

“The Williamsburg market took the lead in terms of very high-priced transactions,” Cohen said, adding he expects Brooklyn retail to perform well through 2018. “I think this is really in contrast to what people are talking about nationally … our story is very different to the Manhattan story.”

The industrial and office market — which TerraCRG representatives said they will consider separating in future reports — saw significant gains that were driven by office conversions and investors’ interest in distribution centers.

In terms of industrial transactions, the most active neighborhoods were Sunset Park and East New York, acccording to TerraCRG.

“Despite what some developers may say, the market is very healthy and very stable,” Cohen said.