Don’t call it BoCoCa: Boerum Hill, Carroll Gardens and Cobble Hill see tightening inventory

Apr.April 01, 2012 07:00 AM

There’s no shortage of neighborhoods that real estate brokers have attempted to coin with catchy names, from widely used newer names like Nolita (North of Little Italy) to names that haven’t caught on with the public yet like SoBro (South Bronx).

But one thing even brokers can agree on in Brooklyn is that few who really know the area actually use the term “BoCoCa” when referring to Boerum Hill, Cobble Hill and Carroll Gardens.

Still, the term does serve as a handy shorthand when discussing market conditions in the trifecta of popular neighborhoods clustered together just south of Downtown Brooklyn.

This month, The Real Deal interviewed analysts and brokers about how the residential market is doing in BoCoCa. Our sources said that inventory is tightening and that townhouses and large apartments are in especially high demand. Those properties, as long as they aren’t in need of a major renovation, are going fastest. But one-bedroom apartments are struggling, largely because buyers are being more discerning and forward-thinking than they were during the boom, when they figured they could easily flip those properties.

In addition, while the area has not seen nearly the same amount of new residential development that other areas of Brooklyn have, like Williamsburg, there are a number of new condo and townhouse projects. And there are more on the way. That’s giving buyers options beyond the co-ops that have historically made up the bulk of the market. Plus, buyers are also venturing further east, deeper into Boerum Hill, despite the housing projects there. And they’re going further west to the Columbia Heights waterfront area, which abuts Brooklyn Bridge Park.

Still, there are challenges, including getting mortgages in small buildings, where banks can’t own more than 10 percent of the units, and high down-payment requirements of 25 to 35 percent, which are precluding some first-time buyers from entering the fray.

For more on which price ranges are doing best and worst and which new projects brokers are watching, we turn to our panel of experts.

Trish Martin, director of sales, Halstead Property

How is overall residential sale volume doing in Cobble Hill, Carroll Gardens and Boerum Hill, also known as BoCoCa, and how does that compare to a year ago, two years ago and during the boom?
Townhouses in Cobble Hill are all going into best and final at above ask. My office just put a $3.8 million townhouse into contract that’s in the middle of renovation work. The market is very competitive in Cobble Hill, very brisk in Carroll Gardens and aggressive in Boerum Hill. Boerum Hill has more of a mix of units and sizes than the other two areas.

What’s going on with residential prices in the area these days?
Prices are up for anything that is a larger apartment. Three-bedrooms, four-bedrooms and townhouses are seeing competitive bid situations.

There are a bunch of new projects in the area like the controversial 360 Smith Street, 225 Pacific Street and 58 Strong Place. How is new development doing compared to the rest of the market?
There are so few opportunities and sites that can be developed, so when new development units do come on the market, if they are of the larger size, they move fast. … One-bedrooms plus an office or two-bedrooms will [also] be embraced quickly.

Are there any other upcoming new residential projects you’re watching?
At the corner of Henry and Amity, the former Lamm Institute [which is part of Long Island College Hospital] is being sold off in parcels. The original building will be three separate new townhouses. It’s interesting because no one bought it and tried to turn it into a million three-bedroom condo units. It’s unusual because it’s keeping to exactly what the neighborhood is and what the demand is there. In addition, there’s a development on Court near Sackett with huge, loftlike two-bedroom apartments with 2,600 square feet. That will be an interesting test of the market because the use of the space is very unusual for this area.

What are the biggest challenges to selling residential property in the area?
It’s the lack of supply versus demand. In my experience, there has never been such a tight supply relative to demand — even during the boom.

Terry Naini, senior vice president, Town Residential

Which types of residential properties are doing best and worst in the area?
The townhouse market is definitely higher than it was during the boom in all these neighborhoods. The co-op is the toughest segment of the market here. Condos are doing well. Some brownstones have turned into condos, but [in the past] new construction was not available, so if you were looking for a one-bedroom, a two-bedroom or a smaller three-bedroom you had no option other than to buy a co-op. That is no longer the case. A lot of co-ops are in small buildings where there might be three to six units. There are a couple of problems with that. Every time you want to get a mortgage it’s hard to get a bank to come in because no bank can own more than 10 percent of the building. … If you already have Wells Fargo or Chase or Citi in there, they can’t loan.

Which price ranges are performing best right now in BoCoCa?
Houses that are in decent shape, anywhere in the $2 million range, fly off the shelf. When looking at a spacious three-bedroom, you’re looking at between $1.2 million and $1.7 million. If it’s in the lower [part of that] price range, it goes fast because there’s not a lot of product.

Which price ranges are struggling most?
At any price, the one-bedroom is tough. One-bedrooms are the toughest market right now because everybody is forward thinking. Even a single person making a first purchase wants two-bedrooms as opposed to before, when they were happy just getting one.

Are there any upcoming residential projects you think are exciting?
I think 340 Court is exciting. It’s too bad that they are doing their own sales. The second phase at 233 Pacific is with the same developer. I think they did a nice job inside. The biggest issue there is they are facing Atlantic and they are on top of a PetSmart. I think the retail tenant is very important in your sellout and it might have been better if they had left it empty until they were sold out.

Which parts of BoCoCa are doing best, and which are struggling most?
Boerum Hill is doing amazingly well and I think it’s because of the commute. It’s closer to transportation than the other two neighborhoods. Also the neighborhood has evolved more than Carroll Gardens. A few years ago, people would have chosen Carroll Garden and Cobble Hill over Boerum Hill and that’s no longer the case. In Boerum Hill we have [housing] projects; maybe that’s why [buyers] used to say they wouldn’t go there. But now it’s as if everybody else has encapsulated the projects rather than the projects influencing the neighboring properties. There are also more interesting restaurants that have opened up in the past few years.

How long are properties in the area staying on the market these days?
It depends on if the property is desirable and doesn’t have any big thing against it. For example, if you have a property facing the BQE, you’re going to have a problem with selling it. It would have been easier during the boom. … Other than that, the properties are generally going within a few weeks to a few months. If it’s a house, it’s quicker unless it requires a lot of work. On average within the first three months everything’s in contract.

What are the most surprising trends you’re seeing in the residential market?
What’s interesting to me is that people are starting to ask for, and go to, the Columbia Street waterfront. There was a time when nobody was willing to cross the BQE. Now because of Brooklyn Bridge Park, more and more people are asking for that area … and there’s not a lot over there. More development will come in the next few years.

Who are the most active buyers, and how does that differ from the past?
Before everybody was buying, and now I see more young couples and growing families. We also have some investors now. I did not used to see investors because it’s really a community where buyers live in it.

Scott Klein, vice president, Prudential Douglas Elliman

What’s going on with residential prices?
They are down compared to the boom, but I think it depends on the property. Townhouse prices are quite strong, [although] they are still reduced somewhat from the height.

Which residential properties are hardest to sell these days?
Anything that needs significant renovation is more difficult to sell. When money is so cheap, people would rather pay for it out of a 4 percent mortgage than have to do the work themselves.

The Atlantic Yards project is going to have a huge impact on this area of Brooklyn. Are you already seeing that impact?
More so for Boerum Hill because it’s closest. However … we are getting more push back with closer neighborhoods like Fort Greene and Prospect Heights than we are Boerum Hill, which in some ways is just as close. … I think people are more hesitant to buy properties that are for sale very close to the project.

What kinds of discounts off asking prices are being seen these days in the area?
It depends on how the property is priced. In general, the rule of thumb is somewhere between 4 and 7 percent negotiability. … [But] there is less negotiability than there was a year or two ago.

Leslie Marshall, senior vice president, Corcoran Group

Which price ranges and apartment types are performing best right now in the area?
One- and two-family houses in Cobble Hill are especially in demand, with multiple offers seen in the $2.5 million market and up into the mid-$3 million range. Larger apartments are also selling very well, and there is always a limited supply of three-bedrooms in BoCoCa, so if something comes on the market, especially with outdoor space, it will sell very quickly.

Are there any upcoming new residential projects that you’re watching?
Construction is underway on the second phase of the very successful 14-townhouse project on State Street between Smith and Hoyt. These nine townhouses will be ready in about 18 months, and will be priced around $3.5 million. There are some smaller boutique projects being built as well, such as the very high-end 253 Pacific Street. Another new project, the Collection — on Court Street and Union — is under construction but there is very little public information about it. Cobble Hill Towers, a complex of historic landmarked buildings on Warren and Hicks streets, is the first conversion of a rental property in recent memory and is more than 20 percent in contract.

What are the most surprising trends you’re seeing in the area right now?
In Carroll Gardens, the Superfund designation of the Gowanus Canal had far less impact on the market than anyone thought it would. And now that Whole Foods is underway, buyers are even more excited to live in Carroll Gardens.

Brian Lehner, senior vice president, Brown Harris Stevens

What’s going on with prices outside of the townhouse market?
Co-ops and condos have not yet risen to [townhouse] levels. Smaller units have [only] maintained prices over the last two years. But with rents rising, I expect to see some upward movement on the prices for entry-level apartments.

What’s going on with financing for residential purchases these days?
Mortgages continue to be cheap, and that has been the appeal for buyers at the middle and toward the high end of the market. The downside is that banks, though they’ve relaxed some lending requirements, are still looking for relatively high down payments — 25 to 35 percent in most cases, and that has kept some otherwise qualified first-time buyers away.

What’s going on with the broker landscape in the area?
I’d say the brokerage community has grown somewhat over the past few years and would have grown more were there more inventory to sell. Despite all the talk of new development, there has been relatively little over the past few years compared with Williamsburg and Manhattan.

Sofia Song, vice president, research, StreetEasy

How is overall residential sale volume doing in BoCoCa?
In terms of transaction volume, BoCoCa had 34 percent fewer closings in the last quarter of 2011 compared to the same quarter in 2010. Compared to two years ago, it’s had 64 percent fewer closings. To provide some context, Brooklyn overall had 9.7 percent fewer closings in the fourth quarter compared to 2010, and 14.7 percent fewer closings than in 2009.

What’s going on with residential prices in the area these days?
The median closing price in the fourth quarter was $713,000. That’s a 6.4 percent increase compared to the prior year and a 32.1 percent jump since 2009 [at the bottom of the market].

Which price ranges are performing best and worst right now in BoCoCa?
In this current quarter so far, it appears that the lower-priced listings make up the majority of contracts. About 18 percent of contracts are under $500,000 and 30 percent are in the $500,000 to $750,000 range. About 29 percent of contracts were between $750,000 and $1.25 million. [The rest] of the contracts were above that.

How is the new development market doing compared to the rest of the residential market?
In the current quarter, 21 percent of listings that have gone into contract were in new developments. In last year’s first quarter, only 6 percent of contracts were in new developments.

Saul Retig, associate broker, Brooklyn Bridge Realty

Which apartment types are struggling the most in the area?
Studios and smaller one-bedrooms can be a struggle to sell. A one-bedroom in a good school zone that can be converted into a two-bedroom will have better value to a couple that plans to start a family.

How is the new development market doing compared to the rest of the residential market?
Brooklyn Bridge Realty is the exclusive broker for the condos at the Landmark at Strong Place. [We] first began sales in December 2010 and we are 70 percent sold now. … The sponsor wisely waited [and launched when] the market was already picking up. Other projects in the area that came on too soon might have had some difficulty, resulting in a turnover of the brokerage firm marketing it or it might have turned into rentals.

Are you seeing any impact of the upcoming Atlantic Yards project on the residential market?
I’ve had one or two buyers who didn’t want to look close to Atlantic Yards. They thought there would be too much traffic congestion in the area. My take is that it will be a positive. I think that for the first year or so as you get close to the Atlantic Yards, it may affect pricing. But eventually the neighborhood will adjust and prices will hold. Atlantic Yards will be the clincher that will tie in what’s happening in the Metro Tech area and new towers like the Toren or the Brooklyner.

Are there any other upcoming new residential projects that you’re watching?
The seven-story, 32-unit building at 340 Court Street being built by Alchemy Properties. I have been getting many inquires about it from my buyers. It will really be a significant change in the landscape of that part of Carroll Gardens.

What’s the inventory like in the area these days?
Things sell quicker than two years ago, but [are not flying] off the shelf as they did during the boom years. … At open houses for townhouses or two- to three-bedrooms you can get 20 to 30 people.

What are the biggest challenges to selling in the area these days?
Definitely appraisals and financing. It’s very difficult to get expensive construction loans if you have a property that needs a gut renovation. It is common to see ads for all-cash buyers for those properties that need extensive renovations.

What’s going on with the broker landscape in the area these days?
I’m actually seeing more brokers these days. There are a lot of people who were laid off from other jobs that are doing this temporarily and plan to go back to their professions or maybe will find this is a viable second career. There is also some movement of a relatively new Manhattan brokerage with a few offices already making inquires about opening up in BoCoCa.

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