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News release

NEW YORK, NY

JLL Finds New Developments Changing Office Landscape in Brooklyn

New office projects replacing residential developments in submarkets due to low office vacancy rates


NEW YORK, March 2, 2016 — JLL’s most recent commercial real estate market report on the Brooklyn office market highlights several new office projects that have replaced prospective residential developments in high-profile areas of Brooklyn. With office vacancy rates remaining at just 4.0 percent, investors and developers are planning or have announced a number of office projects throughout the submarket. According to the firm’s research, fourth quarter 2015 statistics reveal that the transformation of the Downtown Brooklyn office market continued unabated.

“We have seen a greater geographic diversity in the development pipeline, including projects across a large swath of Northern Brooklyn near Williamsburg and Bushwick. The diversity in scale of the projects and the broad diversity in target markets is a major indicator of the dramatic transformation occurring throughout the borough,” said Michael Shenot, Managing Director with JLL. “A number of recent noteworthy investment sales clearly demonstrated an ongoing increase in post-recession valuations in Brooklyn, and that trend will likely continue given the number of high-profile properties currently on the market.”

JEMB Development’s 420 Albee Square project, which was announced in the fourth quarter, will be the first ground-up office development project in Downtown Brooklyn since the area’s 2004 rezoning. The developer had originally intended to build a multifamily property, but with Downtown Brooklyn recording a vacancy rate of 4.0 percent at year-end 2015, the 475,000-square-foot office building will provide much needed office space. Glacier Global Partners’ 10 Jay Street project in Dumbo was also previously earmarked for residential use, but is now slated to be developed as a 196,516-square-foot office building.

In addition, Quinlan Development Group and Building & Land Technology are converting the 242,992-square-foot 41 Flatbush Avenue from a self-storage facility into a modern office building. The speculative project, which is expected to be delivered in the third quarter of 2016, was added by JLL to its Brooklyn office inventory this quarter. Without the addition of that space, Downtown Brooklyn’s vacancy rate would be just 2.1 percent in the fourth quarter of 2015.

Several major transactions were signed in Downtown Brooklyn at year-end 2015. In the largest lease the submarket recorded in the final quarter of the year, WeWork expanded its footprint with a 76,580-square-foot commitment at 195 Montague Street. In addition, Saks Fifth Avenue OFF 5TH, owned by Hudson’s Bay, signed a 30,000-square-foot retail lease at the building.

While new developments remained the big story in Downtown Brooklyn at year-end 2015, the submarket also reported a number of high-profile investment sales. Rubenstein Partners acquired a partial interest in the 25 Kent Avenue office development from Heritage Equity Partners for $132.4 million, Thor Equities closed on two condominiums at 180 Livingston Street in Downtown Brooklyn in the fourth quarter—one from The Treeline Companies for $81 million and another from The Brooklyn Tabernacle for $51 million.

The Brooklyn Office Outlook report organizes commercial space into three categories that recognize the unique personality of current Brooklyn inventory: Brick and Beam, Traditional Office, and Flex.

The Brick and Beam category covers new and renovated industrial loft-style space catering to tenants in the technology, advertising, media and information, or TAMI, sector, as well as tenants seeking production, design and studio use, among others. Encompassing in excess of three million square feet of current total property inventory, the Brick and Beam category is poised to become a dominant category in future years. Renting at an average price of $63.14 per square foot in DUMBO, the Brick and Beam category represents some of the most expensive properties in Brooklyn.

The Flex category, catering to a wide range of tenants, from “makers” to creative office users, includes product in the Brooklyn Navy Yard and the area alongside Flushing Avenue, the Atlantic Avenue Corridor and the South Brooklyn Waterfront. Representing more than 17.6 million square feet of current inventory, the Flex category rents at an average of $26.28 per square foot, and offers a steep discount when compared to Brick and Beam options.

The Traditional Office category, located in areas such as Downtown Brooklyn, features properties with traditional office space typically occupied by the government, financial services and legal sectors. Covering 12 million square feet of space, the Traditional Office category rents at a comparatively modest price, at an average of $46.06 per square foot. Shaped by the public transportation corridor running from the Brooklyn Bridge to the Barclays Center, Downtown Brooklyn is poised for future development as investors seek properties with transportation as a selling point.

JLL is a leader in the New York tri-state commercial real estate market, with more than 2,000 of the most recognized industry experts offering brokerage, capital markets, property/facilities management, consulting, and project and development services. In 2014, the New York tri-state team completed approximately 22.8 million square feet of lease transactions, arranged investment sales transactions valued at more than $5.4 billion, managed projects valued at $7.6 billion, and oversaw a property management, facilities management and agency leasing portfolio exceeding 163 million square feet.

About JLL
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 230 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000.  On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $56.4 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.