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Honey, I shrunk the deals: Brooklyn investment sales volume down 34%

Same number of transactions, but smaller prices in first quarter

Brooklyn Investment Sales Dip 34 Percent

A photo illustration of Dan Marks along with an aerial view of 2731 West 12th Street and a street view of 1301 Avenue M in Brooklyn (Getty, Google Maps, TerraCRG)

Brooklyn investment sales were a third smaller last quarter, dragged down by interest rates and government regulations.

While the number of deals remained steady, dollar volume fell by 34 percent from the previous quarter and 15 percent year-over-year, according to a new report from commercial brokerage TerraCRG.

Sales were stymied by high interest rates, the 2019 rent law and the expiration of 421a, TerraCRG CEO Dan Marks said.

“I think what we’re seeing now is a result of all these things coming together,” Marks said. “With that said, we’re really optimistic that the new housing plan will prove to be a boost in the arm to the market. But, of course, these things aren’t felt immediately.”

The average transaction size was $3.6 million, down from $5.6 million in the fourth quarter.

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There were bright spots in the report. Multifamily building sales had a strong quarter with $247 million in deals, up 21 percent. Market-rate buildings accounted for the bulk of those transactions, but Marks said he expects an uptick in rent-stabilized building sales as lawmakers allow greater — and permanent — rent increases for individual apartment improvements.

“I think what’s happening now is the people who have held on to these stabilized buildings for as long as they could, either they are experiencing some sort of fatigue as their expenses go up and their income is limited, or their loans are coming due,” he said. “Perhaps some of the new housing policies that are getting passed may make it more attractive for people to get back into that space.”

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The two biggest commercial sales from the last quarter were industrial: Industrial giant Prologis paid $51 million for the undeveloped parcel at 2731 West 12th Street and investment firm Heitman shelled out $47 million for the self-storage facility 1301 Avenue M.

But small transactions account for most of the borough’s investment sales. Marks said the median size of deals has held steady at around $2 million across all assets classes every year since 2019.

“That’s where the bulk of the market transacts every single year,” he said. “It doesn’t get the headlines because the headlines track the big $50 million, $100 million, $200 million deals. But this market really operaties in that range — $2 million to $5 million is the sweet spot.”

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BrooklynInvestment Sales