TerraCRG releases Brooklyn 2012 Market Report

The Brooklyn Market in 2012 The Brooklyn commercial real estate market boomed in 2012. We have verified a total of 1,621 commercial sales with a total consideration of $4.38 Billion, double the dollar volume of 2011 and approximately a 40% increase in the total number of sales. Residentially zoned development sites saw the biggest increase in year-over-year transaction volume per asset class, with 217 sales. Dollar volume saw a 221% increase with a consideration of over $695 million in 2012, up from approximately $216 million in 2011. Commercial sales in the South Brooklyn region showed strong results in Brooklyn, with a total consideration of over $916 million, with over $821 million in retail sales, most of which were a result of the sale of Kings Plaza Mall, which sold for $751 million. The sale of the Kings Plaza Mall represented the largest transaction in New York City during this period. Sales of multifamily buildings represented approximately 34% of the dollar volume in 2012 with 585 transactions, the most transactions of any category, totaling approximately $1.3 billion. The Bed-Stuy/Bushwick/Crown Heights regions had the highest number of transactions with 529 in 2012 for a total consideration of over $568 million, almost double the dollar volume of 2011. The average deal size increased 45% from approximately $1.8 million in 2011 to approximately $2.6 million in 2012. Transactions of $10M and over jumped from 2011 with 29 trades totaling approximately $660 million, to 59 trades totaling over $2.2 billion in 2012. Other transactions, including conversion properties, residentially zoned industrial buildings, hotels and special use properties had a total $478M in dollar volume and 127 other commercial properties sold during this period. Brooklyn Predictions for 2013 Overall volume in 2013 is expected to continue to grow but at a slower pace. The rush in the last quarter of 2012 to close transactions before the end of 2012 due to fiscal cliff concerns may impact that the first quarter of 2013 with a lower volume of transactions closed. That being said, the Brooklyn market will continue to show strength as it attracts more institutional and foreign capital into development and cash-flowing assets and as more property owners will try to take advantage of favorable market conditions. The retail sector in Brooklyn is expected to continue the same trend as in 2012 with larger transactions taking place in core retail corridors around the Barclays Center and Downtown Brooklyn. Williamsburg is expected to go through its next phase of transformation with high-end and national retailers following the changing demographics of residents. We believe development site sales activity peaked last year and as a result, most shovel-ready sites have been purchased and are now being built mostly as rentals. This means land-sale activity will level off in 2013, mainly due of lack of inventory. This, in turn, will put upwards pressure on pricing of well-situated residential development sites. At the same time, we expect to see more assemblages of existing tear-downs and an increase of large trades of commercially-zoned lots that developers will try to bring through the rezoning or variance process. By the end of this year, developers will break ground on large condo projects again. Multifamily sales are expected to continue to show strengths and we expect volume to increase in 2013 as institutional owners and large portfolio owners try to take advantage of the low yield expectation and bring large portfolios to market before the low interest rate environment changes. Brooklyn's strong market fundamentals mean residential rents in core and transitional neighborhoods will continue to increase aggressively as more residents call Brooklyn their home. To these new residents, Brooklyn is no longer a more affordable alternative to Manhattan, itÂ’s a destination. This upside opportunity will attract investors that so far concentrated their efforts on Manhattan to buy multifamily buildings in Brooklyn.