Commercial market report

From the city’s most profitable Opportunity Zones to the upscale food hall craze, a look at the biggest trends

Jun.June 01, 2019 01:00 PM

NYC tops list of high-growth OZs

The Gowanus neighborhood in Brooklyn leads a new ranking of top earning Opportunity Zone tracts, raising questions about whether it should be included in the federal tax break program. And it wasn’t the only area in New York City that contains OZs to have also seen its local incomes rise over the last decade.

A report released in May by San Francisco-based consulting firm Webster Pacific found that New York was the top high-growth area for OZs in the country, highlighting a potential disconnect between an initiative designed to encourage investment in economically distressed areas and specially designated zones in need of development. OZs, which were selected based upon census tract data, generally must meet a low-income threshold or be near an area with those parameters in order to qualify for the program, which emerged last year out of the Trump administration’s late 2017 federal tax overhaul.

New York itself has 306 OZs, and the report from Webster Pacific, which ranked census tracts by the percentage change in $200,000-plus income households since the turn of the century, found that Gowanus reported almost no households earning that sum or more in 2000, but such households now account for 22 percent of its population. Gowanus was one of 15 regions in the New York metropolitan area appearing on Webster Pacific’s top 50 list for real estate investment, many of which are in rapidly gentrifying areas. Other neighborhoods on the list were Williamsburg, at No. 4, and Long Island City, at No. 42.

As a matter of comparison, San Francisco, a city known for its surging real estate valuations and which Webster Pacific said was the second-highest growth area for OZs, had only four such tracts on the firm’s top 50 breakdown. Critics of the OZ program, whose guidelines were clarified by the U.S. Department of the Treasury in April, have claimed that it increases financial gains on projects that developers already planned to build, instead of helping distressed neighborhoods. That has not stopped some of the city’s real estate titans from seeking to capitalize on OZs.

Brookfield Asset Management, New York’s largest commercial landlord, recently revealed that it is looking to raise roughly $1 billion for an OZ fund that will target residential developments in Brooklyn and the Bronx. — Kevin Sun and Georgia Kromrei

Developers hear the food hall call

A recent report from Cushman & Wakefield exploring the expansion of the food hall phenomenon found that New York is one of several cities — others include Boston, Los Angeles and Miami — with major projects under development. In 2016, there were about 120 food hall projects across the country, a number that will quadruple to 450 by 2020, according to Cushman & Wakefield.

Perhaps taking note, global private equity behemoth the Blackstone Group announced shortly before the barbeque bonanza of Memorial Day weekend that it would sink its teeth into Flushing’s flourishing dining scene with a new food hall. Blackstone’s development is being led by Colicchio Consulting, a boutique firm that brokers food and beverage deals between property owners and its own network of top chefs and restaurateurs.

Phil Colicchio, the firm’s executive managing director and a cousin of acclaimed celebrity chef Tom Colicchio (who is in its in-house network), now co-chairs the food, beverage, entertainment and hospitality practice at Cushman & Wakefield, which acquired Colicchio Consulting late last year. He told The Real Deal at the International Council of Shopping Centers’ four-day convention in Las Vegas that his deal with Blackstone for 30,000 square feet of “chef-driven” and “fast-cash” eateries at the Shops at Skyview will be a “game changer” for Queens.

Blackstone, whose ShopCore Properties unit owns the Skyview complex, confirmed the future food hall, but said that the size of the project still had yet to be determined. In addition to Blackstone, Colicchio’s other notable clients include Tishman Speyer and Simon Property Group. Cushman & Wakefield’s report noted that food halls are increasingly expanding into shopping malls, college campuses and office towers, many by using community spaces and branding partnerships with craft breweries or media companies.

The report cited Google’s $2.4 billion Chelsea Market buy, Urbanspace near Grand Central Terminal, the opening of José Andrés’ Mercado Little Spain at Hudson Yards and future projects at Columbia University and Vice Media’s Munchies Food Hall at Triple Five Group’s American Dream megamall in New Jersey as evidence of the growing popularity of food halls in the New York commercial real estate market. — Erin Hudson

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