New York’s outer-borough renaissance was well on its way by the start of the 2000s, but it really kicked into overdrive over the past ten years.
Think about 2010, when Two Trees Development secured a rezoning for the Domino Sugar factory site in Williamsburg. Two years later, the Barclays Center opened in Downtown Brooklyn. And while most development in Queens was, at the start of the decade, focused on the Hunters Point waterfront, towers started sprouting up around the Queens Plaza area years later.
The progress in the outer boroughs has been “seismic,” according to Hudson Companies’ David Kramer, who’s overseen numerous developments deep into the boroughs of Brooklyn, Queens and the Bronx.
Outer-borough development has come so far from the days when it basically meant a few neighborhoods in Northern Brooklyn. In fact, in terms of new projects in 2020, Queens is on pace to surpass Brooklyn, according to data from Nancy Packes cited by the Wall Street Journal.
Kramer weighed in on the 2010s, and looked ahead to what’s in store for the next decade.
What’s been the most noticeable change over the past 10 years?
I think ten years ago, institutional equity didn’t know [about] the outer boroughs except for maybe Dumbo and Williamsburg. You know, they weren’t buying $100 million sites in the South Bronx. They weren’t accepting all of Brooklyn and Queens. It was still very much a bridge too far for a lot of investors.
Ten years ago, for example, we were developing 22 Caton Place [in Windsor Terrace]. We took a lot of investors out there, and if it wasn’t near downtown Brooklyn or the L train, it just didn’t register with them. They didn’t quite know what to make of it.
We got really lucky because one of my most important capital partners grew up not far from 22 Caton. So he knew Flatbush; he knew, from beyond Brownstone Brooklyn. Today, you wouldn’t have to worry about making that argument about being a block from Prospect Park. And all these Manhattan developers… you think about Bruce Eichner, who’s trying to do a project on Empire Boulevard [in Crown Heights].
If you look at where Manhattan has gone in that 10 years versus where parts of the Queens skyline, downtown Brooklyn, all the neighborhoods we’re in… it’s really been an incredible ten years. Like, in 2010, Amazon wasn’t coming to Long Island City.
What impact have major rezonings had?
Certainly you see that in Downtown Brooklyn and parts of Queens obviously. But I think what happened was that the zoning was the condition precedent and the market caught up with the zoning. The perfect example of that is Downtown Brooklyn, which was rezoned for high density with a vision of it being an office community that was going to rival the Jersey coast line for back-of-office real estate. In order to build to that density, you need either decent office rents or decent residential rents, and at the time of the rezoning those residential rents were not apparent to anybody.
Is it more difficult to get neighbors on board with new developments?
Maybe it’s a smidge worse just because we live in an age of anxiety right now. And everything is a little worse than reality. So neighbors’ reactions to developments may have a little more agita in them. But I’ve been hearing expletive-laden angry protests from neighborhoods going back to early 90s when I was building affordable housing and people were telling me I was ruining their home values. So there’s always going to be that.
Also, what’s impacted the neighborhood ecosystem is that there’s been a lot of prosperity and it hasn’t been equal. As a result, if you want to do a rezoning, you have to expect a 75-25 [affordable] split as the floor, with expectations way beyond that. Contrast that with when Bloomberg and Doctoroff were rezoning Greenpoint/Williamsburg and the council people were trying to get some increase in the housing requirement and it didn’t go through. That is so far from today’s reality. Could you imagine rezoning Greenpoint and Williamsburg and not having an affordable component? The politics have changed; real estate’s changed; the market’s changed. Some of this stuff is pretty seismic.
Has it become more difficult to find projects that pencil out?
Ten years ago we had this model that we thought was incredibly reasonable and affordable and we did a bunch of projects. The formula was that we were going to buy land for $50 to $60 [per square foot], build it for $250 [a foot] and we were going to rent it out for rents in the $30s and $40s [psf]. And that made sense to us. And based on that we did a lot projects in the early teens.
Particularly 2010, 11, 12 we thought things were very reasonable for what we wanted and there wasn’t a lot of competition doing what we were doing. We did a lot of projects in a short period of time because there was that window where we thought the pricing was reasonable and we were more bullish on the outer-borough rental market than the Brookfields of the world. And that made a big difference. And at some point it was no longer a bridge too far for private equity and pension funds and other developers to consider these places. So you look at the Dursts doing a project in Astoria — but not Astoria sitting on top of the N train. Astoria, a mile from the subway. And you see examples of that all over Brooklyn and Queens. And by the way, when we’re talking about the outer boroughs, we’re basically talking Brooklyn and Queens. The Bronx story, they’re in the first inning of their renaissance.
What’s on tap for the next decade?
If you’re looking at the arc of the decade and what comes next for a lot of these outer borough developments, the answer is absolutely retail. And that’s usually the way it works: Residential sort of comes in first, creates density and creates foot traffic and then retail feels more comfortable moving in.
I was always amazed at how long it took for an Apple store or a Whole Foods to come to Brooklyn. Brooklyn’s a borough of 2.5 million people. They’ve been writing headlines about resurgent Brooklyn since the turn of the century and yet the first Apple store opened in 2012.