Red hot, Red Hook retail: Examining the effects on the borough due to recent development projects

Thanks to the recent arrival of a certain Swedish megastore named IKEA, one of the hottest urban neighborhoods on everyone's mind is trendy Red Hook in Brooklyn. Due to favorable manufacturing zoning districts (M-zone), the area has witnessed continual growth within the retail sector. With large blocks with favorable zoning for as-of-right development of additional large retail, Red Hook retail is red hot. The major project that has propelled Red Hook transformation and is on everyone's mind is the 346,000 s/f IKEA, which opened June 18th. Back in the summer of 2006, the world-renowned Swedish-based furniture company decided on a historic 19th Century dry dock site along Beard St. for its 35th U.S. location and 4th in the tri-state area. For three consecutive years the company has been named in FORTUNE Magazine's "100 Best Companies to Work For" list and has recruited and trained over more than 500 Brooklyn residents to operate the new Brooklyn location. The store was erected on 22 acres along the Erie Basin waterfront and presents 50 different room settings, three model home interiors, a supervised children's play area and a 450-seat restaurant serving Swedish specialties including their infamous meatballs. The project also includes a six and half acre public waterfront esplanade. Red Hook residents have expressed concern about the increase in traffic and how the estimated 18,000 weekend shoppers will affect the local transportation infrastructure. The megastore can be accessed either by car, complimentary water taxi running every 40 minuets to Pier 11 in Manhattan and Fulton Ferry Landing in DUMBO by the Bus B61 or B77 lines, which just were extended to accommodate shoppers. There is also complimentary shuttle service that runs shoppers to and from Borough Hall in Brooklyn, which has access to the 2, 3, 4, 5, M and R subway lines, Smith and 9th St. or the 4th Ave. stops that are serviced by the F and G subway lines. Regardless of the influx, IKEA's creation of its own transportation infrastructure helps both local residents and shoppers. The barriers of entry for building successful large scale retail developments are more complicated than office and residential developments. The first challenge and hurdle is getting tenants to sign a pre-commitment even prior to any construction. Strictly retail developments tend to be tremendously more difficult to finance. Retail developers can dramatically increase their chance of obtaining bank financing by receiving a pre-commitment from a parent company of a prospective retail tenant. Banks feel more secure knowing that the developer has pre-arranged with a tenant versus lending on a project where a developer has to find a tenant during the course of or after completion of the project. Retail developments can also be tricky due to the inherent risk the project takes on with community opposition. Traffic patterns are usually affected and have to be considered in the planning process. Community opposition usually results in delays in the project and/or alterations to initial proposals. Retail developers and tenants usually flock to other successful projects, as is the case in Red Hook. One of Red Hook's first large retail ventures opened its doors to Brooklynites two years ago. Spearheaded by investor/developer Greg O'Connell, who opened the high-end grocery store Fairway Market and the artist lofts named "The Red Hook Stores," both were an instant success and attracted the masses. They consist of 55,000 s/f of retail, 48 rental apartments and 230,000 s/f of artist lofts with 45 tenants, six artist work spaces and three spaces for non-profits actively involved in the Red Hook community. Situated between The Red Hook Stores/Fairway Market and the new IKEA is the old Revere Sugar Plant site, owned by developer Joe Sitt of Thor Equities. Over the last two years Thor Equities has spent approximately $10,000 million on demolition and excavation at the site, and now has a vacant 10.37 acre site containing approximately 903,434 buildable s/f. He purchased the site from the city in 2006 for $40,000 million, or $44 per buildable s/f. He has not yet presented plans to the community board. Sitt is currently attempting to move forward with his enormous Coney Island waterfront redevelopment plan, where he owns the majority of the waterfront and boardwalk and is waiting for approvals. After years of speculation as to whether Red Hook would ever gentrify or go through a similar transformation of other waterfront Brooklyn locals, it is safe to say that Red Hook retail has put the area on the map. Expect to continue to witness tremendous changes in this once unknown area of Brooklyn. Red Hook is now a destination location, and "Red Hot, Red Hook" is finally here! Landon McGaw is a broker and exclusively covers Red Hook for Massey Knakal Realty Services, Brooklyn, N.Y.