Transformation on Horizon for Brooklyn, LIC

Downtown Brooklyn’s overall office vacancy rate at Q1′s end was just 4.9%; LIC’s stood at 13.1% at that time.

NEW YORK CITY—The borough of Brooklyn and the Queens neighborhood of Long Island City are on the cusp of a major transformation, with 10.5 million square feet and 2.4 million square feet of new development in their respective pipelines. A new report from brokerage firm JLL on the two markets reveals that the supply side of the office markets in the two areas have taken center stage. The report marks the first time JLL has combined analysis of the two markets into one report, citing the increased symmetries between Long Island City and Kings County. “We are seeing, and will continue to see, the waterfront areas of Brooklyn and Long Island City transform rapidly,” says Michael Shenot, managing director with JLL. “It is striking to see how areas outside of the established Downtown Brooklyn submarket, such as the Flushing Avenue Corridor, have transitioned into a viable office market in just the past few years.” He adds that developers are attracted to both Brooklyn and Long Island City due to its available talented workforce between the ages of 25 and 45 as well as the amenities that make both areas a vibrant live, work, play environment. “The Brooklyn and Long Island City waterfront also offers considerably cheaper rents compared with competitive markets in Manhattan, especially after incentives are taken into account. With all of these factors in mind, I expect a marquee Manhattan-based company to make the move across the river, which will only intensify the area’s growth.” On the development side, both Brooklyn and Long Island City have seen plans for major development projects unveiled recently. Greenland Forest City is looking to build what could become the largest traditional office building in the outer boroughs, a 1.5-million-square-foot office tower at 590 Atlantic Ave. in Downtown Brooklyn. The development necessitates the reallocation of 650,000 square feet of air rights from the adjacent Barclays Center Plaza, JLL reports. In the Long Island City area, Tishman Speyer reportedly is seeking EB-5 financing for 1 Gotham Center and 3 Gotham Center, which, when combined, would add 1.1 million square feet to the market. The 3 Gotham Center property already has a 258,000-square-foot commitment by WeWork to anchor the building. At 37-47 Austell Pl.—which was purchased in 2015 by Normandy Real Estate Partners, Drake Real Estate Partners and GEM Realty—the property will be transformed from industrial uses into a loft office space. The 180,000-square-foot redevelopment project is expected to be delivered by late 2017. The overall office vacancy rate in Downtown Brooklyn at the end of the first quarter was just 4.9%, while Long Island City’s overall office vacancy rate stood at 13.1% after the first three months of this year. The report, authored by Tristan Ashby, vice president, research director at JLL and Craig Leibowitz, director of capital markets research, tri-state for JLL, also notes that the iconic 733,000-square-foot Watchtower Building at 25-30 Columbia Heights in Dumbo could change hands. The Jehovah’s Witnesses building is currently under contract for purchase, along with a 1.1-million-square-foot development site at 85 Jay St. owned by Kushner Cos., RFR Realty and LIVWRK for $700 million. Also in Brooklyn, RXR Realty and Westbrook Partners closed on the $161-million purchase of 47 Hall St. in the Flushing Avenue corridor, with plans to repurpose the full block of industrial buildings into approximately 700,000 square feet of commercial space.