The CastleBraid apartments at 114 Troutman Street in BushwickMuch like once-obscure Soho in the 1980s, Bushwick is a magnet for today’s artists and hipsters. And real estate players are now hoping to get in on the action.
Developers are salivating over sites in Bushwick, industry experts said, especially as nearby Williamsburg has transitioned from a gritty industrial area to an expensive residential neighborhood. Bushwick is still relatively affordable in comparison, but is seeing strong demand for rental housing.
“It’s no coincidence that I got three or four calls in the last month about Bushwick,” said Ian Lester, a Manhattan attorney who represents a number of commercial developers.
But Bushwick’s longtime identity as an industrial area presents obstacles to development, especially when it comes to zoning. Unlike Williamsburg, the city seems committed to maintaining Bushwick’s industrial zoning, experts say, which could prevent the building of large-scale housing developments in the prime northwest corner of the neighborhood.
And for right now at least, Bushwick is significantly “rawer” than Williamsburg, which sometimes comes as a surprise to developers, said David Behin, president of investment sales at brokerage MNS.
“A lot of developers want to put money out in these [North Brooklyn] neighborhoods,” Behin said. “I can see the reaction when we get to Bushwick, though. For a lot of them, it is too pioneering.”
An industrial past
The swath of Brooklyn known as Bushwick lies east of Williamsburg along the L subway line and southeast along the M train. (The northwest portion is also sometimes called “East Williamsburg.”)
The area was rocked by “white flight” in the 1960s and riots in the 1970s after New York City’s famed blackout, and was long considered blighted. But in recent years, it has attracted artists and event venues like Jonah Bokaer’s Chez Bushwick, a former knitting factory turned performance space. The area off the Morgan Avenue stop on the L, in particular, has seen a bevy of new retail, including hipster holy grail Roberta’s, a pizza place that opened in 2008.
Meanwhile, the Knick, a “green” 49-unit condo developed by the Hudson Companies, opened last spring. Mayer Schwartz’s CastleBraid Apartments, a 144-unit rental catering to artists (“I believe there is a kiln” in the building, Behin said), opened in 2009 and is fully rented. Rents at CastleBraid range from $1,900 to $3,500 per month, according to the building’s leasing office.
These changes have developers anxious to snap up property in Bushwick, which they believe could be the next hot residential neighborhood. In addition to Schwartz and Hudson, developers active there include Henry Development and Cayuga Capital, sources said.
These builders are, not surprisingly, attracted by how Bushwick developments pencil out, brokers said.
In the area of Bushwick that’s south of Flushing Avenue, the purchase price of development sites is rarely above $80 per square foot, said Neil Dolgin, president of Dolgin Kalmon Affiliates, which leases and sells commercial buildings extensively in Bushwick. In the more gentrified areas to the northwest, prices are closer to $125 per square foot, he said.
With rentals in the neighborhood fetching as much as $40 per square foot per year, those numbers make sense, brokers said.
For redevelopment projects, Dolgin said, a developer can expect to make back the initial investment and borrowing costs in less than 10 years, similar to the time-frame in hotter Brooklyn neighborhoods.
According to Behin, the Jefferson stop on the L — one stop east of Morgan — is the next obvious area that young artists and professionals will begin flocking to. That’s good for developers because “you have a lot of vacant land available” there, he said.
Behin noted that apartments in the area have been getting higher-than-anticipated rents; at newly redeveloped 184 Noll Street, for example, studios now rent for around $1,550, according to the website StreetEasy.
Developers are also eying the area near the Central Avenue stop on the M train, sources said, where 960 Willoughby currently has asking rents starting at $1,500 for a studio.
“Investors and developers are looking to follow the L and M trains for investment opportunities,” said Matthew Cosentino, a TerraCRG broker who specializes in multifamily and mixed-use properties in Bushwick.
And these developers are especially anxious to snap up Bushwick property while taking advantage of today’s low interest rates on construction loans. “At some point, [my clients] are like, ‘I just want to do a deal,’ ” Lester said. “They aren’t sure how long the cheap debt is going to be around.”
Many of them are looking at six- or eight-unit projects, where “you can buy a brownstone and condo it,” Lester said.
In the southeastern area of Bushwick in particular, “you have a lot of smaller properties available for development, that you can build, or knock down and build on,” Dolgin said.
But when it comes to residential development, Bushwick has zoning challenges that other up-and-coming neighborhoods don’t.
The southeastern area of the neighborhood is zoned mostly for residential. But the sought-after northwestern area — where Roberta’s and other trendy retailers are located — is zoned for manufacturing, so residential building is largely banned there.
Michael Amirkhanian, a Bushwick specialist at Massey Knakal Realty Services, said the manufacturing-zoned area on the map is shaped, perhaps fittingly, like “an upside-down middle finger to the development community.”
And while the city passed a high-profile rezoning for the Williamsburg and Greenpoint waterfront in 2005 — paving the way for high-density housing in formerly industrial sites — no such rezoning is on the horizon in Bushwick, the department of City Planning said.
The North Brooklyn Industrial Business Zone, which encompasses a portion of Bushwick, was created in 2005 by Mayor Michael Bloomberg as “a sort of policy statement: ‘Hey, these are industrial and are currently used for manufacturing — and should stay that way,’ ” explained Mitchell Korbey, head of the land-use department at law firm Herrick Feinstein.
The Bloomberg administration has done a record number of rezonings, but sources said the mayor, along with Brooklyn borough president Marty Markowitz, wants to keep Bushwick’s zoning predominantly industrial to preserve the city’s manufacturing base. Dolgin, for example, said he recently sold a 46,000-square-foot parcel at McKibbon and Bogart streets for $4.37 million, and the site will be used as storage for scaffolds.
In some southern portions of Bushwick, a mixed-use building can be redeveloped as residential, but a variance is required to do that in most of the popular East Williamsburg area, and they are rarely granted, Dolgin said.
One way to pursue development in Bushwick is through the city’s “loft law,” which allows commercial buildings to be used as residences if they were inhabited by three or more tenants during a certain period in the early 1980s. Local developer Israel Hirsch, president of Bushburg Properties, said he is currently using that tactic for a 24-unit development at 385 Troutman Street, where he hopes to convert commercially zoned space to residential because artists’ studios in the building have been lived in.
Some real estate developers have gotten around zoning restrictions in Bushwick by building hostels, which have proven lucrative, sources said. Commercial zoning allows for hotels, and hostels can qualify if they have no more than two beds in a room.
The New York Loft Hostel, a renovated loft building at 249 Varet Street in East Williamsburg, is one example of a successful development, brokers said.
“Basically every time I’ve gone there, they say they are raising their rates,” Behin said.
Another challenge to doing deals in the Bushwick area, however, comes because sellers there are often unsophisticated, some say.
“There is a disconnect between the new users and the owners,” said Matt Blesso, owner of 3rd Ward, a commercial space for artists near the Morgan Avenue subway stop. “If you have an 80-year-old immigrant and some young hipsters trying to explain why he should do some kind of tenant improvement build-out … it just doesn’t work.”
Lester agreed. “A lot of these sellers are old-school, meaning they are literally old,” he said. “The key is listening to a bunch of stories about the old country.
“They won’t sell to you unless they like you,” he added.
The result is quiet deals, often done without a broker, said Behin.
Currently, Massey Knakal has only two available residential development sites in Bushwick — 1501–1503 Jefferson Avenue, which has 13,200 buildable square feet and an asking price of $695,000, and 36A Arion Place, with 5,034 buildable square feet and an asking price of $225,000.
But in a neighborhood where Roberta’s pizza now costs up to $17, Dolgin advises developers to seize opportunities wherever they can find them, especially on sites with the right zoning already in place.
“Where development is as of right,” he said, “get your plans approved and go!”