Rent along some of Brooklyn’s most attractive retail strips is testing old boundaries and, in some cases, hitting new records per square foot.
In April, CPEX Real Estate Services reported that rents along several Brooklyn retail strips had more than doubled over the course of five years. The firm identified three corridors where rents are commanding between $150 and $199 per square foot: Court Street between Atlantic Avenue and Dean Street in Boerum Hill, Bedford Avenue between Metropolitan Avenue and North 8th Street in Williamsburg and Flatbush Avenue between Atlantic Avenue and Dean Street in Prospect Heights.
Now, brokers report that those rents are creeping beyond the core blocks along Court Street and topping previous peaks along Bedford and Flatbush, making side streets and non-core blocks more attractive. The Real Deal took a look at the price history in these areas and spoke to brokers about what to expect next.
The latest retailer to pay top dollar for a spot on Court Street is international retailer Benefit Cosmetics, a subsidiary of Louis Vuitton Moet Hennessy. Following a bidding war for the 600-square-foot space at 168 Court Street, the landlord signed Benefit Cosmetics to a lease at more than double the rates retailers were paying just a year ago, according to Ryan Condren, managing director at CPEX, who brokered the deal.
That would put the rent per square foot at about $200 — a first for a spot south of Dean Street. One block north, apparel retailer Rag & Bone paid roughly $190 per square foot at 160 Court Street earlier this year, according to multiple brokers who are active in the area.
That fits with the pattern of rents advancing about a block beyond the prime area every six months or so, according to Condren.
In June of last year, J. Crew paid about $100 per square foot for a blended ground and second-floor space at 151 Court Street on the corner of Pacific Street. Two months later, Schuckman Realty put Splendid at 142 Court Street, where the rent at the 1,100-square-foot space exceeded $100 per square foot.
“One of the big selling points to this section of Court Street is you’re at the crossroad of five major neighborhoods,” said Condren. “When you look at the power of those five neighborhoods, it’s one of those unique locations where everywhere to your north, south, east, west, it’s very, very strong demographics-wise.”
Whether or not those rates can stick remains to be seen. As Brooklyn’s cache grows and residential development continues to boom nearby, national retailers are willing to absorb the cost of peak rents to establish their brands in the neighborhood, said Nicole Liebman, a director of retail leasing in Brooklyn for Massey Knakal.
“There’s been a huge rift between nationals and locals. Nationals have a ton of corporate backing, so they can pay upwards of $200 per square foot,” said Liebman.
Liebman is marketing a 1,400-square-foot space next to the popular Sahadi’s import market, just around the corner from the costliest Court Street strip on Atlantic Avenue. Offers are coming in at $115 to $120 per square foot, up from about $70 per square foot two years ago.
While the priciest rents in Williamsburg have long been found along Bedford Avenue between Metropolitan Avenue and North 8th Street, retailers are now looking beyond the strip as rents top $200 per square foot in some cases, brokers said.
“[Retailers are] starting to look for deals outside of that prime zone where there’s still plenty of visibility, plenty of action, plenty of foot traffic,” said Joshua Singer, head of retail leasing at the Heller Organization.
Heller recently marketed 101 Bedford, where Diesel has opened a pop-up store with the option to take out a long-term lease. Located near North 12th Street, it is just north of Bedford’s priciest stretch. Asking rent for the space was $175 per square foot.
In Williamsburg, retailers also have options on the neighborhood’s thriving side streets, said Diana Boutross, a broker at Winick Realty who arranged for Starbucks to take 154 North 7th Street, off Bedford Avenue.
“It’s a side street market,” said Boutross. “You can get half rent on the side street and open a big, awesome store.”
Along the neighborhood’s second-priciest corridor, North 6th Street, Urban Outfitters recently opened a nearly 37,000-square-foot concept store called Space Ninety 8.
Along the Flatbush Avenue retail corridor opposite Barclays Center in Prospect Heights, long-awaited establishments like Shake Shack are finally opening and others such as Doughnut Plant have signed leases nearby.
Brokers familiar with negotiations in the area estimate Shake Shack’s rent at about $200 per square foot and expect leases at neighboring buildings to meet or exceed that level.
“Those are prices that two years ago, three years ago were not even close,” said Liebman. “A lot of restaurants make sense, but to spend $200 per square foot is tough, so it really has to be the right business model with the right capital.”
One business model that was perhaps not right is Verizon’s Viva Movil, a mobile phone brand fronted by Jennifer Lopez. Verizon reportedly paid more than $200 per square foot for a flagship location at 162 Flatbush Avenue next door to Shake Shack. The store shuttered this month. The company told the New York Observer that the location couldn’t meet financial expectations.
With Barclays Center just across the street, brokers say the strip is best suited to dining and entertainment.
Schuckman Realty is marketing a 45,000-square-foot, three-floor space at 604 Pacific Street, located next door to the former Viva Movil. Among the interested parties is a professional athlete who is considering investing in a restaurant, Kenneth Schuckman previously told The Real Deal.