The Real Deal New York

2012 Brooklyn residential development sales surge

More than 1.5MSF of buildable floor space purchased in first half of year

July 18, 2012 03:30PM
By Adam Pincus

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From left: Massey Knakal's Michael Amirkhanian and 77 Commercial Street

Reacting to the rising rental market in Brooklyn, investors purchased more than 1.5 million square feet of residential development space in the borough during the first six months of 2012, almost four times the amount purchased during the same period in 2011, The Real Deal found in an analysis of Massey Knakal Realty Services data.

Investors spent $171 million to buy those 1.5 million square feet this year, while developers paid $55 million during the first six months of 2011 to buy land with just over 400,000 square feet of development rights, the analysis reveals.

Developers are trying to capitalize on the tight rental market in the borough, where brokerage firm MNS shows rental rates for studios and two-bedroom apartments rose by double digits in May, compared to the same period a year ago.

Rental rates are heading up even as condominium sale prices and volumes fell in the first quarter, information from appraisal firm Miller Samuel shows. Some insiders said volume fell because of a lack of supply.

The Manhattan builder the Chetrit Group made the largest Brooklyn development acquisition so far this year, paying $25 million for a warehouse at 77 Commercial Street in Greenpoint that is zoned for residential. While the developer could build a 271,499 square foot building under its current zoning, they could more than double the site to 618,339 square feet if they add affordable housing and purchase additional air rights.

The total amount of buildable square feet purchased in Brooklyn rose in part because lenders are jumping back into the construction finance market, Michael Amirkhanian, director of sales at Massey Knakal, said.

“There had been a lot of deals getting kicked around but now they are actually getting financing,” he said. Lenders are generally underwriting projects as rentals, he added.

The 1.5 million square feet purchased this year would turn into about 1,500 apartments if each has an average size of 1,000 square feet.

The Real Deal analyzed Massey Knakal data released Monday during the commercial firm’s quarterly market briefing.

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