The pace of luxury development in Brooklyn is picking up as builders expand on the borough’s high-end potential, ticking off a slew of projects that started with David Walentas’ 1998 conversion of Dumbo’s Clock Tower Building into luxury lofts.
Bored by brownstones and clamoring for the contemporary, buyers in Brooklyn are seeking out new residential projects in massive numbers today – and developers are delivering.
At least 130 new projects have been constructed in Brooklyn since Walentas gambled on the Clock Tower conversion, with neighborhoods such as Dumbo, Williamsburg and the edges of Park Slope leading the way. What’s already built is only a drop in the bucket compared to the deluge about to come, developers and brokers say.
In this issue, The Real Deal takes a comprehensive look at new development in Brooklyn, with an in-depth chart (link at bottom of story).
While Manhattan may have led the city in new residential construction during much of the 1990s, these days Brooklyn leads the pack.
Overall, Brooklyn is projected to have more than 5,000 new apartment units within the next two years, according to Elan Padeh, CEO and president of Brooklyn-based marketing firm The Developers Group. Construction permits for more than 3,800 units were granted through July of this year, compared to permits for 2,200 units in Manhattan.
The borough has -to an extent – stolen a march on Manhattan’s neighborhoods. Many buyers consider upscale Brooklyn Heights as the answer to the Upper East Side, while artsy, loft-dominated Dumbo is the alternative Soho. Liberal, family-oriented Park Slope can be viewed as the borough’s Upper West Side and hipster Williamsburg is the East Village.
Across Brooklyn, new units are routinely fetching $600 a square foot, up from $500 a square foot just a year ago, said Jay Schippers, managing director of the Corcoran Group’s Brooklyn Development Division.
“Brooklyn is no longer being viewed as the poor stepchild of Manhattan,” said Josh Guberman, president of Brooklyn-based Core Development Group, a developer active in both Manhattan and Brooklyn.
Padeh said Williamsburg and Dumbo will be the most active areas for new projects. While only a few new luxury condo units have already been built in each neighborhood only around 300 apartments in Dumbo and 350 in Williamsburg “It’s the possibility of the neighborhoods” that is driving the hype, according to Padeh.
Roughly 8 million square feet of new residential development the size of three Time Warner Centers is expected to be built in the next five years in Williamsburg. Prices for new developments currently range from $500 to $900 per square foot.
In neighboring Greenpoint, Padeh is working with a developer who is looking at doing a massive 4,000-unit project there, though growth in that area depends on success in Williamsburg first, he said.
In Dumbo, 10 new developments are expected to be built or converted in the next two years, tripling the number of existing condo buildings and quadrupling the number of units. New project prices in Dumbo currently range from $600 to $900 per square foot.
In Park Slope, development is occurring along the periphery. On Fifth Avenue and 15th Street, a new trend of converting brownstones to condos and three-story buildings to six-stories appears to be growing, said John Reinhardt, president and CEO of Brooklyn-based Fillmore Real Estate. A rezoning along Fourth Avenue that took effect a year ago allows buildings up to 120 feet (or around 12 stories), and several new projects are already underway. Prices for new developments range from $485 to $600 per square foot.
Other areas getting increased developer interest are formerly blighted areas like Bedford-Stuyvesant and Bushwick, where the goal is to build decent but more affordable housing at higher price points than they would command a few years ago.
Padeh said Bedford-Stuyvesant is “the next bastion” for developers, and building is already happening. Land is half as cheap as Dumbo and Williamsburg $50 to $80 a square foot and developers can charge $325 per square foot for a new condo, he said. Parts of Bushwick are now called East Williamsburg, and Guberman and others are currently working on projects there.
Padeh said there is no lack of buyers in any community. “There are a lot of people renting that want to buy,” he said, adding that “contemporary is what sells,” as an alternative to the borough’s sizable inventory of older housing stock.
“Every single developer I know has a client list of 2,500 buyers waiting,” he said.
Demand is so high that the market for new developments has started to overheat, leaving brokers to deal with frustrated buyers in the fast market.
“The major challenge in selling in Brooklyn is keeping the buyers happy because we sell so quickly that many buyers can’t keep up,” said Schippers. He said that by early October, his group sold 24 of 30 units in its Park Slope Gardens project at 305 3rd Street, a week after they hit the market.
In another project, Boulevard East at 53 Boerum Place, his group sold 75 percent of the 98 units in six weeks, compared to their normal six-week average sale rate of 50 percent.
Ten years ago, the condo sales market was virtually dead, with supply far exceeding demand, Schippers said.
Walentas, whose Two Trees Management controls much of Dumbo, “showed it paid to build luxury units in Brooklyn,” Padeh said. “Up until that point, there was no new high-end development.”
With the bar raised, today’s builders are offering amenities on par with Manhattan developments. In addition to better bathroom fixtures and lighting, Reinhardt said amenities like granite countertops and hardwood floors are becoming standard issue in the area, which is making these properties easier to sell.
Amenities don’t stop there in many projects. Apartments at Schaefer Landing the first luxury residential development to be built on the Williamsburg waterfront will feature oak floors, recessed lighting, and a washer and dryer in every home. The building will also have a fitness center, riverfront lounge, catering kitchen, business center, children’s playroom, parking garage, library, roof deck terrace, landscaped private gardens and, pending approval from the city, a publicly accessible ferry dock for water taxi service to and from Manhattan. Sales recently opened for the development, which is still under construction. Douglas Elliman is marketing the project.
The developing market isn’t always able to match demand. Schippers said that although many buyers are looking for loft-style units, they make up only about 20 percent of available units.
Other parts of the borough are also slated to see increased building activity. Downtown Brooklyn, a mostly commercial neighborhood, is seeing new projects due to a massive rezoning effort. A city master plan for the area calls for about 1,000 new apartments, mostly on the fringes of revitalized neighborhoods such as Boerum Hill and Fort Greene/Clinton Hill (see story under “Feature Story” header on main page). At the Toy Factory Lofts at 176 Johnson Street, units are fetching $540 a square foot.
“The area will see a lot of projects,” said Padeh, because of the lack of height limitations seen in other sections of Brooklyn. “The neighborhood is really an extension of four existing communities [including Brooklyn Heights, in addition to the neighborhoods mentioned above], so depending on how those expand, it will shape the character of the area.”
Activity won’t be as heavy in Brooklyn Heights and Cobble Hill, both of which are constrained by their landmark status. Brooklyn Heights has always demanded the highest prices per square foot in the borough, but there is little land to build on for new projects. In Cobble Hill, “a good portion of the area is landmarked, so when you do see a project, it’s a conversion,” Padeh said. The Arches at Cobble Hill, a new development converted from a church, is selling its last remaining units for around $600 a square foot. In the area west of Cobble Hill, there are more new projects. In Fort Greene, there is not much land for new development, because much of the neighborhood is dominated by well-preserved brownstones, though a few projects are underway.
Red Hook is the borough’s big question mark, as it remains relatively isolated from mass transit and convenient access to other parts of the city. While there is beautiful waterfront property, there is no subway access and considerable opposition in the community to any sort of rezoning. Much of the land is still designated for manufacturing, and there are few existing condos. Plus, transforming the area “is on the back burner” for the Bloomberg administration, Padeh said.
“Land there is the biggest gamble,” he said. “There are not a lot of people willing to take that risk.”