The Real Deal New York

Wave of building sweeping Sheepshead Bay

November 16, 2007
By Emma Johnson

Modest and removed from Manhattan’s bustle, the lower Brooklyn enclave of Sheepshead Bay raises eyebrows among real estate insiders when it’s mentioned as one of the hottest development areas in the city.

Although it’s a 45-minute train ride from Manhattan, the area is competing with other smoldering-hot Brooklyn locales in the number of new developments under way or recently completed, and developers there say it makes perfect sense.

In 2005, 266 units were approved for sale in Sheepshead Bay, and a whopping 527 units are in the pipeline, according to the New York state Attorney General’s Office. This parallels the trend in East Williamsburg, which was approved for 177 units in 2005 and has 596 in the pipeline, and Dumbo, which was approved for 611 apartments last year and has 179 units in the works.

Developers have invested in Sheepshead Bay in hopes that the waterfront views, well-known restaurants, and investment in neighboring Coney Island and Brighton Beach will attract Manhattanites, locals, and the Russian immigrants who make up the bulk of the large immigrant community there.

But the quick build-up has some worried that supply might outpace demand, as there have been some indicators that the nationwide slowing of real estate trends will hit this neighborhood with gusto.

“Prices have hit the ceiling, interest rates inched up, and volume has slowed down in the last quarter,” said Anthony Nasti, owner of Coldwell Banker Mid-Plaza and a 35-year resident of Sheepshead Bay.

In the past three years Nasti has seen the price for a detached single- family, three-bedroom house jump from the mid-$400,000s to the mid-$600,000s.

The Breakers, a new development replete with private marina and boardwalk scheduled for sale starting this month, is expected to draw $650,000 for a 1,400- square-foot, two-bedroom condo with a 700-square-foot terrace. A 2,400-square-foot unit with a 1,200-square-foot terrace facing the water in the property is expected to bring $1.55 million, said Albert Wilk, owner of Wilk Real Estate, which represents about 200 units in Sheepshead Bay, including the Breakers.

Rents are also up. Today, a two-bedroom lease could fetch $1,500 per month, while a few years ago the rate was closer to $900 to $1,000. Insiders are speculating what will happen with the influx of condos there come spring, when the market traditionally heats up after the winter lull and several Sheepshead Bay properties are scheduled to hit the market.

Eli Ickovic, an associate broker with Halstead’s Brooklyn Heights office, mentioned one small property of fewer than 10 units that sold last summer for about $500,000 each. Some were purchased before the development was complete, and others were paid for in cash.

Both Wilk and Ickovic are confident that Sheepshead Bay is more resilient to any bubble burst, as waterfront properties will always be a hot commodity in New York. Wilk – whose company Web site is in both English and Russian – said that condos will always attract the Eastern European population, which bristles at older co-ops and houses which remind them of the countries they left.

“Co-ops sound [to Russians] like communist Russia – all for one and one for all,” Wilk said.

But Nasti worries that the influx of properties might hurt in the face of a nationwide slowdown.

“Everything was built on demand,” Nasti said. “And demand three years ago for luxury condominiums on the water was really high. There were not 500 available, and that’s changed. It will be interesting to see how supply meets demand and vice versa.”

Like any historic neighborhood that changes quickly, there are growing pains.

The community – named for a large, zebra-striped fish that still lurks in its murky waters – has deep roots in what was once a booming fishing community where wealthy city folk vacationed in the 1800s. The waterfront once jumped with activity, as clam houses and seafood joints did brisk business amid the yacht clubs and graceful Victorian mansions that dotted the coastline and side streets.

Much of what made the neighborhood so attractive is now being torn down to make room for “condomania,” said Steven Barrison.

The Manhattan lawyer is a lifelong resident and president of Bay Improvement Group, a coalition of locals and business people which has fought development. Barrison laments the loss of the fishing industry and increased congestion.

“A run to Chase Bank now takes an hour where it used to take 15 minutes,” he said. “It’s the joke of the neighborhood.”

The group’s lobbying is expected to result in the downzoning, or restriction of development, along an eight-block stretch along the waterfront, which is up for city vote soon.

“But the majority [of Sheepshead] will still be subject to developers trying to be creative to get around zoning,” Barrison said. He also worries the neighborhood is vulnerable to a future slowdown.

“While the rest of the city and country slowed down in the last 120 days, Sheepshead Bay is still like a race,” he said.

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