Brooklyn had a banner year for investment sales in 2022, but the other shoe may be dropping in 2023.
Investment sales in the borough surged past $9 billion last year, according to TerraCRG data reported by the Commercial Observer. The report noted last year’s deals neared the 2015 peak in the market.
There were 1,506 transactions across the borough, the most since 2016. Average deal size jumped 16 percent from the previous year, coming out to $6 million. There were also 11 deals worth more than $100 million, accounting for more than a quarter of total investment sales volume.
Low interest rates at the beginning of the year helped spur investment sales, as did the expiration of the 421a tax break and the cyclical nature of the market, according to TerraCRG founder Ofer Cohen.
But the Federal Reserve spent much of the year hiking interest rates, reaching a 14-year high in November. The ripple effect sent activity down from 821 deals in the first half of the year to 685 in the second, a decline that remained above pre-pandemic levels.
Still, heightened interest rates and a volatile market could spell a downturn in investment sales in 2023.
“We’re going to have a drop this year,” Cohen told Crain’s.
Mixed-use and multifamily properties were the big winners last year, leading the borough in total transactions and dollar volume, respectively. On the opposite end, office and retail properties finished last in transactions and dollar volume.
Dollar volume was above pre-pandemic levels in every region tracked by TerraCRG, led by more than $3 billion of investment sales in Greater Downtown Brooklyn. The most transactions unfolded in the area labeled north-central Brooklyn, which includes Crown Heights and Bed-Stuy.
CBRE’s $332 million purchase of the industrial facility at 640 Columbia Street in Red Hook was the biggest deal of the year. Avanath Capital Management’s $315 million purchase of two Prospect Heights properties and Boyd Watterson Asset Management’s $307 million buy of the office property at 9-11 Metrotech Center in Downtown Brooklyn rounded out the top three.
— Holden Walter-Warner