Retailers Eye Brooklyn's Prestige Shopping Corridors, Leaving Others Behind
While some Brooklyn landlords have their pick of the retail litter, others are seeing their tenants recede, rents drop and increasing competition from new developments as the borough rapidly evolves.
Though national retail vacancy is at an all-time low, vacancies have started to creep up in parts of the borough as banks and pharmacies reduce their real estate footprints, according to a new report by the Real Estate Board of New York provided to Bisnow.
In the second half of 2023, average asking rents in 12 of the 17 Brooklyn corridors REBNY analyzed fell short of pre-pandemic peak levels by between 11% and 59%.
Rents did tick up from the first half of the year in the majority of the borough's main retail corridors, and leasing is the strongest in high-fashion corridors in Williamsburg as well as highly sought-after residential neighborhoods Park Slope, Cobble Hill and Brooklyn Heights.
REBNY Director of Market Data and Policy Keith DeCoster pointed to brands like Byredo, a perfume store that already has a SoHo location but crafted a new aesthetic for its Williamsburg outpost. The North Sixth Street section of Williamsburg, where Byredo is located, has an average asking rent per SF of $275, up 33% year-over-year and higher than the 2016 peak of $259, according to REBNY.
“Williamsburg has particular tastes and has a very high and discerning buyer,” DeCoster said. “That's what they're trying to align with.”
Similarly, Bushwick’s artist community has attracted out-of-the-box retailers, like Zero Waste Daniel, a genderless upcycled fashion brand that opened in September at 257 Varet St. In neighborhoods where families have flocked since the pandemic, like Park Slope and Vinegar Hill, private and charter schools have quickly spread, leasing office and warehouse spaces.
Brooklyn brokerage TerraCRG Managing Director of Commercial Leasing Peter Schubert stressed that the most successful Brooklyn tenants are those that can connect to residents authentically.
“There’s population growth. It's people working here, people playing here, spending time here. Brooklyn is cool,” Schubert said. “I love spending time in parts of Manhattan, but it's gone the way of the chains and you've lost a lot of the character of some of the neighborhoods.”
As apartment developers focus their efforts on Brooklyn — which accounts for almost half of multifamily project filings in the city, according to another report by REBNY — the retail spaces they are building out in the bottom of their buildings have been slower to fill up.
Of the 825K SF of retail space in the city expected to deliver in 2024, more than half is in Brooklyn, according to Marcus & Millichap data. Construction-heavy areas like Greenpoint, Boerum Hill and Gowanus are dealing with the most vacancy and falling asking rents, according to REBNY.
“It goes hand in hand to some extent,” DeCoster said.
Pharmacies, banks and medical care providers, staples in many outer-borough neighborhoods, have pulled back from leasing, especially as foot traffic to such retailers diminishes. In Prospect Heights, the average asking rent is $110 per SF, down 17% year-over-year, per REBNY. In Dumbo, it was $67, falling 21% from the previous year.
Still, TerraCRG’s Schubert said that the asking rent metric is not as reflective of interest as it may be in Manhattan.
“It's tough to hang your hat on asking rent because Brooklyn is not institutional,” Schubert said. “You might have an asking rent of $60 a foot and the landlord says I want every bit of $60. Others may say it's $60, but then they're willing to do a deal at $30.”
