Softening predicted for Brooklyn office market

By James Kelly | August 05, 2008 01:32PM

The Brooklyn office market is expected to soften throughout the remainder of the year as total employment growth in the borough stagnates, according to a market report from brokerage Marcus & Millichap.

The report predicts a decrease of total employment in the borough by .2 percent. 

A decrease in new office space construction this year compared to 2007 is expected to tamp down any increase in the borough’s vacancy rate. Only 50,000 square feet of new space is expected to come online by the end of the year, compared to 237,000 square feet delivered last year. 

Brooklyn’s average vacancy rate was 10.4 percent at the end of the second quarter, up 70 basis points from the year prior, the report said.

The borough’s small inventory of Class A space saw improvement, down 150 basis points to a vacancy rate of 14.2 percent.

The market’s Class B vacancy rate jumped 3.6 percent to 12.1 percent. The 111,000 square feet of new Class B space that came to market over the past year remains 26 percent vacant.

The vacancy rate of Class C space, which the report said has always been in relatively high demand in Brooklyn, fell 80 basis points to 5.1 percent.

Overall, average asking rent reached $27.58 per square foot at the end of the second quarter, up 5.1 percent from the previous year.

Class A asking rents slipped 1.7 percent over the past year to $27.50 per square foot. The asking rent for Class B space increased 14.1 percent from last year to $30.92 per square foot, while Class C asking rents climbed 6.5 percent to $22.02 per square foot.