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Stacey Corso is the editor of Real Estate New York magazine. This article appears in the publication’s July/August issue.

BROOKLYN, NY-Swedish home furnishings retailer IKEA plans to build a new outlet store on the shores of the East River in the Red Hook section of Brooklyn. The company has purchased a 48-acre site at One Beard St. for $31.25 million. Upon completion, the 346,000-sf store will be IKEA’s largest in the US and signifies the retailer’s penetration of the New York City market.Kenneth S. Roth, president of Rothwood Real Estate Services represented IKEA in the transaction while Eastern Consolidated’s vice chairman Brian Ezratty, senior director Jeffrey B. Troy and director Louis Ricci represented the seller, US Dredging Corp., a shipyard operator.

The Terms

“Currently the site encompasses 22.5 developable acres of land, while the remaining 25 acres could be developed in the future. Ikea plans to build a $100-million outlet measuring 346,000 sf.

Ikea was looking to penetrate the boroughs or else the New York City market for the past four years. The closest store is Elizabeth, NJ— and then to some degree Hicksville, NY—on Long Island. This deal was really a key ingredient in the firm’s gaining a stronghold in the City of New York.

In the end, Ikea chose Red Hook because of land availability. It’s a great piece of property, with terrific visibility and a good road network feeding it. To find this large a tract of land in the City of New York is a rather difficult task, which took me over two years.

The retailer is also contracting with a ferry service to run direct ferries from New Jersey and Manhattan on the weekends. Then, they are going to run a bus service in and out of the city to transport people seven days a week.”

The challenges

“Initially, residents in Red Hook had traffic concerns. We have done a number of traffic studies to verify that the site is right for both the trucking of furnishings and to support normal traffic. The road network is fine. In the same area (Gowanus), there was a lot of success with the Home Depot and Costco.

Ikea garnered the approval of the local community board in Red Hook by using land use counsel to represent them in dealing with the local community board and New York City Council to obtain rights to this property.

It was also difficult and time-consuming to obtain the proper permits. Originally, the site was an M3 (a manufacturing) property that was rezoned as an M1 (manufacturing) property. And then, Ikea had to obtain a special-use on top of the M1 zoning in order to secure retail zoning. In all, it took about three years to obtain the proper permits and variances.

Getting the approvals necessary to be able to allow this to be built was definitely the hardest part of the deal. Ikea spent all of its own money while the owners of the property continued to operate the a shipyard. The approval process was a difficult one because it was time consuming and we had to satisfy a broad spectrum of different groups in order to get it done properly.

There were also some minor environmental hurdles to scale. Although the site was not a brownfield, there were some minor environmental issues that needed to be taken care of, however; Ikea is not disclosing the cost of the cleanup.”

The Future

“While it’s not in an Enterprise Zone, Ikea might be getting some tax abatements from the city or state, but it’s unclear right now.

But perhaps most unique about the property is the fact that we were able to take an industrial property and bring it to its greatest and best use. In addition to the approvals for the Ikea, there are also three additional pads that will be approved. So there will be some other retail or restaurants coming into the area, along with a waterfront promenade that will conform to the waterfront requirements.

This site will take an area that was somewhat downtrodden and improve it for both local residents and shoppers visiting the area. We did the same thing for the promenade and Costco in Queens and it looks great. In essence, it will spark the revitalization and redevelopment of Red Hook.

It also means jobs for Brooklyn residents and a boon for Manhattan shoppers, who currently have to travel to either Elizabeth or Paramus New Jersey to shop at IKEA outlets. Neither New Jersey store is easily accessed by public transportation so having a retail center closer to Manhattan is a huge benefit.”

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