The Real Deal New York

Brooklyn I-sales saw a surge in dollar volume last year. But there’s a caveat

Dollar volume increase can be attributed to massive Starrett City deal
By Eddie Small | February 07, 2019 07:00AM

Clockwise from the top: Starrett City, 175-225 3rd Street, and 30 Front Street in Brooklyn (Credit: iStock)

Brooklyn’s investment sales market saw a large spike in dollar volume in 2018 thanks to a series of big deals, but transaction volume stayed mostly flat, according to a new report from Ariel Property Advisors.

Overall, the borough saw $7.84 billion worth of deals across 1,079 transactions and 1,404 buildings last year. This was a 24 percent increase in dollar volume, a 4 percent decrease in transaction volume and a 0.3 percent decrease in building volume year over year.

Brooklyn’s multifamily market had the highest dollar, transaction and property volume among all asset classes, with 648 deals across 795 buildings worth $4.13 billion. This was a 5 percent decline in transaction volume, a 1 percent decline in building volume and a 61 percent increase in dollar volume compared to 2017, largely due to the $905 million Starrett City deal. Brooksville Company and Rockpoint Group purchased this 46-building portfolio from Starrett City Associates in New York City’s second-largest portfolio deal of the year.

The only other asset class that saw dollar volume increase year over year was development sites. Dollar volume rose 31 percent to hit $2.38 billion, while transaction volume dropped by 4 percent to hit 302 sales. Building volume rose by 4 percent to hit 455 properties.

The sector saw several institutional-sized transactions, with 10 deals accounting for $1.1 billion, 46 percent of the total dollar volume. These included Fortis’ $91 million purchase of 30 Front Street from the Jehovah’s Witnesses and RFR’s $115 million purchase of 175-225 3rd Street from SL Green and Kushner Companies.

Bedford-Stuyvesant, Bushwick and Crown Heights were the top neighborhoods by transaction volume at 54, while Downtown Brooklyn and Park Slope were the top neighborhoods by dollar and building volume at roughly $1.2 billion across 89 properties.

Directors at Ariel saw conflicting signs for the 2019 Brooklyn market. Albany being fully under Democratic control could slow down deals as investors wait to see what new real estate laws will take effect, but the new Opportunity Zone program could boost activity in neighborhoods like Greenpoint, Red Hook and Sunset Park that are included in the initiative.

“The benefits this program provides will most likely lead to a surge in development transactions during 2019,” Ariel director Sean Kelly said in a statement. “Coupled with some aggressive rezoning efforts focused on creating affordable housing, we expect to see a surge in new affordable units, which should ameliorate concerns over the housing shortage.”