What’s behind de Blasio’s plan to revamp Downtown Brooklyn?

New report shows rezoning in 2004 produced a lot of residences, but precious little office space

From left: The Toren, Downtown Brooklyn rezoning map and Metrotech
From left: The Toren, Downtown Brooklyn rezoning map and Metrotech

Mayor Bill de Blasio’s administration released a proposal today calling for a new series of improvement projects for Downtown Brooklyn. A report issued on Tuesday about the results of the previous revamp of the area’s central business district – a rezoning in 2004 — may offer some insight as to why the current mayor feels compelled to revisit the issue.

The report – issued by the Downtown Brooklyn Partnership – shows that Downtown Brooklyn has changed dramatically in the past decade, but the reality on the ground looks far different than the vision proposed 10 years ago.

Indeed, the Department of City Planning and New York City Economic Development Corporation predicted that the 2004 rezoning plan would add 4.5 million square feet of new Class A office space to the business district. But the Downtown Brooklyn Partnership report shows that just 250,000 square feet of new office space has come on line during the last decade. Total office space now stands at 17 million square feet, according to the report.

Meanwhile, the city’s original assessment projected that the 2004 rezoning would generate 1,000 new housing units. Instead, developers have constructed nearly 5,000 residential units and have nearly 7,800 in the pipeline, according to the report.

To a large extent, the boom in residential construction explains the shortfall in office space.

“Highest and best use became residential as the city’s housing market went nuts,” said Tucker Reed, president of the Downtown Brooklyn Partnership.

The economy didn’t help matters, either. One of the main reasons for the 2004 rezoning was to build up affordable class A office space for back-office functions and reduce the risk of companies moving jobs to New Jersey. Few of those jobs materialized, however, as financial firms contracted during the financial crisis and Great Recession.

But with the city now seeking to add jobs in the so-called Tech Triangle that encompasses Downtown Brooklyn, Dumbo and the Brooklyn Navy Yard, the Partnership’s report warns that Brooklyn risks losing jobs to other cities unless developers create office space to address the needs of tech firms.

“As the [office] vacancy rate has crept down to 4 percent or less, what little inventory we have will soon be gone,” said Reed.

Christopher Havens, director of commercial leasing for Aptsandlofts.com, said he believes Downtown Brooklyn has actually lost office space since rezoning, primarily due to conversion of office space to residential.

“Nothing consequential has been added to the stock,” said Havens. “Right now, because of the [Class] B and C loss, we’re at a net negative from 10 years ago.”

The quality of tenants in existing space, however, has gone up and employment is strong, said Havens. The rise of residential development at the expense of office space can’t be blamed on the architects of the rezoning, he added.

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“That’s not a result of the [rezoning] plan. That’s a result of Downtown Brooklyn being an incredible place to live in,” said Havens.

One knock-on effect of Downtown Brooklyn Becoming A More Attractive Place to reside is an increase in retail, said Noel Caban, senior vice president at Winick Realty Group.

Indeed, retail development has hit slightly closer to the mark set by the city in 2004 than office and residential. The Brooklyn Downtown Partnership reports builders have created 625,000 square feet of new space since 2004. City Planning and the EDC originally expected 900,000 feet of retail space in new office and residential buildings.

Continued residential development on streets such as Livingston and Willoughby bodes well for the retail sector, said Caban, but developers will have to be flexible to make sure the mix of retail in ground-level space appeals to new residents.

“There has to be some concession in terms of rent being asked so you can provide the right type of service provider to the market,” said Caban.

The de Blasio administration’s new proposal looks to encourage more retail development by allowing stores on the ground level of some city-owned buildings, according to a statement issued by the mayor’s office.

Absent, however, is a call for new office space as ambitious as was put forward in 2004. The city is instead studying how municipal agencies can consolidate to clear room for commercial construction and affordable office space in buildings such as 65 Court Street.

Havens believes a number of older buildings along Court Street are ideal for companies that embody the modern economy and want space in unique buildings.

Still, he thinks Downtown Brooklyn will eventually attract a tenant able to finance a new building. “To get forward commitment for a large tenant is very challenging,” said Havens, “I believe it will happen in the next two years.”

In a statement to The Real Deal, EDC spokesperson Kate Blumm said, “There continues to be great potential and opportunity for office growth in Downtown Brooklyn, as part of the overall momentum seen across the board in the neighborhood — and many of EDC’s investments in the area support both the supply and demand for office space.”