More of Brooklyn’s retail streets saw average asking rents climb higher this winter than ones that experienced declines. And new development continues to be one of the key driving forces behind pricing.
Average asking rents increased on 8 of 15 retail streets this winter from a year earlier, according to the Real Estate Board of New York’s bi-annual Brooklyn retail report.
“I think rents in Brooklyn have leveled off, as opposed to some of the major markets in Manhattan where they’ve dropped,” said Cushman & Wakefield’s Diana Boutross, a member of the advisory committee that produced the report. “Brooklyn is still an emerging market; there’s still a lot of new retail.”
While asking rents were up in the majority of corridors REBNY tracks, fewer strips saw increases compared to the summer, when the trade group’s report showed average asking rents climbing in 10 out of 15 corridors.
And the trend of overall rising asks stands in contrast to Manhattan, where retail asks have been in correction mode across the borough since peaking in 2014. Average asking rents in Manhattan fell during at the start of the year in 10 out of 11 Manhattan corridors tracked by Cushman & Wakefield, according to the brokerage’s first quarter retail report.
“Brooklyn is probably looking more for the top, where as in Manhattan they’re looking for the bottom,” said Michael Slattery, REBNY’s senior vice president of research.
And while Brooklyn asking rents in general were on the rise, Slattery noted that the report’s figures can be heavily influenced by one or two properties in a particular area. If an expensive retail space gets leased up and taken off the market, it would skew the average asking rent lower, though that doesn’t necessarily indicate landlords though spaces were worth less than they previously had been.
Brooklyn’s largest increase came on the stretch of Flatbush Avenue in Prospect Heights from 5th Avenue alongside Barclays Center to Grand Army Plaza near Prospect Park. Retail pricing in the area has been on the rise ever since the opening of the Barclays Center, and over the winter average asking rents there grew 30 percent to $109 per square foot.
Park Slope also saw a notable increase along 5th Avenue from Union Street to 9th Street, where average asking rents grew 21 percent on the year to $95 per square foot.
On the other end of the spectrum, two streets in Greenpoint experienced the biggest declines. Franklin Street from Meserole Avenue to Commercial Street saw average asking rents drop 36 percent to $57 per square foot, and they fell by 13 percent to $64 per square foot on Manhattan Avenue from Driggs Avenue to Ash Street.
In Manhattan, landlords have been adjusting to the rent correction by offering more incentives like free rent and construction credits. But Cushman’s Mitzi Flexer said Brooklyn’s retail market is populated by a different type of player — there’s a preponderance of smaller owners who have held their properties longer and are less inclined to play that game than larger, institutional landlords who have to hit certain rents.
“The percentage of those kinds of landlords in Brooklyn is not as high as it would be in Manhattan,” said Flexer, another member of the report’s advisory committee.
Some of the Brooklyn’s priciest areas continued to see a rise in asking rents.
Downtown Brooklyn’s Fulton Mall from Boerum Place to Flatbush Avenue remained the most expensive strip with average asking rent of $359 per square foot, up 10 percent from a year earlier.
In Williamsburg, two stretches on Bedford Avenue and North 6th Street where average rents are north of $200 per square foot saw pricing continue to grow, while stretches on North 4th and Grand streets with rents below $200 per square foot saw declines.
Bedford Avenue continued to post the highest absolute asking rent, with pricing ranging as high $600 per square foot.
REBNY’s report noted that pricing has remained strong in areas where new residential and commercial properties are being developed. Declines were mostly registered in more mature neighborhoods where landlords are still trying to figure out how to position their retail space in a competitive environment.
Advisory committee member Robin Abrams of Eastern Consolidated said Brooklyn isn’t immune to the forces that drove rents in Manhattan to a point where the market pushed back.
“When you look at Brooklyn, some of the areas were aggressively priced saw huge increases in demand from gentrification and new construction,” she said. “We’re starting to see a little bit of a reduction and some pushback.”