Q & A: Riding high in Brooklyn Heights

Tight inventory helps insulate market, although high end taking longer to sell

Mar.March 04, 2008 08:55 PM

The residential market in Brooklyn Heights has more than just its tree-lined streets going for it. While the neighborhood has become something of a buyer’s market because of the recent economic uncertainty, the limited inventory in
the Heights has helped insulate it from the more severe pain seen in some other Brooklyn neighborhoods.

Brokers and other experts interviewed for The Real Deal’s Q&A this month said buyers are taking their time before making commitments, but tight inventory is keeping
prices steady, with family-sized apartments in the area in the shortest supply. Still, the
highest end of the market is not necessarily thriving. Brokers said that there are few townhouses
coming on the market, and those that are priced over $4 or $5 million are taking longer to
Among the few new condo developments for sale in the neighborhood is One Brooklyn Bridge Park (on the edge of the neighborhood), which is scheduled to have its first wave of owners move in late this month, and several other projects that add variety to the neighborhood’s inventory, which is arguably the most expensive and Manhattan-like in the borough.

The conversion of a parking garage on Love Lane to luxury condos is in the works, and the Jehovah’s Witness Watchtower Bible and Tract Society’s sale of several properties will mean more new units for the neighborhood in the future.
Meanwhile, on the brokerage scene, smaller firms have been getting gobbled up
by Manhattan-based giants like Halstead and Prudential Douglas Elliman, but new independent firms are still popping up. For more on the brokerage scene and the market in Brooklyn Heights, here is what the experts had to say.

Don Fraser real estate attorney, Fraser & Fraser

What is the most negative aspect of the Brooklyn Heights market right now?

Buyer anxiety. I watch them think, ‘Am I the last guy buying at the absolute peak of the market?’ And, it’s a little trickier to get the mortgage processed. There are a lot more conditions by the bank, and it makes a process that is stressful to begin with even more stressful.

How have buyers’ and sellers’ mentalities changed recently?

The level of anxiety in the buyer is more evident [when it comes to] issues with the banks, the fear of the unknown and what direction the economy is moving in. Will they find in six months or a year that they can’t resell for what they paid? We don’t get a ton of transient buyers in Brooklyn Heights. A lot are committing to a significant period of time living here. Sellers who are attuned to the market are probably a little less aggressive with the buyer and more real in their expectations. On both sides, probably, people are more
cautious right now.

How is the Brooklyn Heights market faring in relation to other parts of Brooklyn now, including Park Slope and Williamsburg? How is it faring in relation to Manhattan?

The Heights has always been solid and will remain that way. Williamsburg has so much new construction. I have had a couple of deals [there] recently that make me suspect that it has been slowing down. The Slope seems pretty stable. Manhattan is still strong. I have more foreign buyers lately in the Heights. The Heights has always attracted many Irish and British clients over the years as well as Canadians and Italians.

What is the most exciting new condo project in Brooklyn Heights right now (that you are not involved with)?

The Love Lane parking garage complex is supposed to be undergoing a conversion to condos. The biggest are One Brooklyn Bridge and 110 Livingston, although neither is technically in Brooklyn Heights. The [Jehovah’s Witness Watchtower Bible and Tract Society] is placing a number of their properties on the market. They have made it known that the Bossert [Hotel] is for sale and their Columbia Heights property is being marketed for rentals, although some thought it would be condos.

Which sectors of the residential market are doing best and worst in Brooklyn Heights?

When it comes to family-size apartments, the prices rise dramatically, and you shrink your potential market. Many want to stay in this neighborhood, but it is a struggle to find the next family-size apartment or townhouse because the selection is limited. Developers tend not to build larger apartments. There aren’t a ton of townhouses on the market in the Heights. When priced appropriately, they seem to move. I don’t see the same frenetic pace when buyers would waive financial contingencies and home inspections. Right now, they want the certainty that the financing will come through without any hitch.

Kim Soule vice president, the Corcoran Group

Which buyers and sellers are most and least active?

There are many first-time buyers coming in from Manhattan looking for one- and two-bedrooms. Most of the sellers are either selling to leave the city, are empty nesters or are [looking to] cash out and move into rentals as they fear the market will drop.

How is the Brooklyn Heights market faring in relation to other parts of Brooklyn?

Many people are priced out of the Heights and don’t even put it on their wish list.

What is the most exciting new condo project in Brooklyn Heights?

There are several in the works, but nothing currently available — 166 Montague Street and the Love Lane garage conversion, to name a few.

What’s one telling statistic about Brooklyn Heights?

Buyers are paying over $1,000 a square foot for great condos and co-ops.

Which parts of the residential market are performing best and worst in Brooklyn Heights?

Smaller units and three-bedrooms are doing well. High-end townhouses over $4 million are slow.

What is the most underrated part of Brooklyn Heights, and where are the best bargains?

There are some great co-ops in older buildings that need some work. They will have the best [price] upside.

Where are prices at compared to six months, a year or two years ago?

Prices have leveled off and are holding steady.

What is the brokerage scene like?

The brokerage community is generally more cooperative as the big companies have moved into the neighborhood. We are starting to lose many of the mom-and-pop shops, but in a tighter market, everyone is a lot more amenable to co-broking.

Sandra Dowling principal broker, Brooklyn Heights Real Estate Inc.

What surprises you most about the Brooklyn Heights market right now?

Its resiliency in spite of less-than-optimistic economic news and depressing media reports. The information disseminated in the press has caused some nervousness. Also, some buyers have confused the information regarding the Fed’s potential lowering of short-term borrowing rates with the further lowering of interest rates.

What is the most exciting new condo project in Brooklyn Heights right now (that you are not involved with)?

There are several new exciting projects evolving, which include conversions of both a beautiful Romanesque office building on Montague Street and a former large loft garage on [Love Lane]. They are conversions with original character and are not new construction.

Which sectors of the residential market (townhouses, condos, co-ops, rentals, etc.) are doing best and worst in Brooklyn Heights?

All areas of sales are doing well. At the moment, the overall rental market is a bit sluggish, but that will soon pick up with the spring-summer onslaught of renters. Co-ops are being overlooked a bit for those in search of the condo market, but co-ops are the heart of Brooklyn Heights. Studios are a great deal right now.

What’s the overall level of sales activity like compared to six months, a year or two years ago? What’s open house attendance like?

Open house attendance has been very high. Through the month of January, our accepted offers have been off from a year ago. However, our Presidents’ Day weekend was fabulous for accepted offers, so I think the buyers are back. Prices are not increasing as aggressively as they have in the past, but neither are they declining.

What’s happening with rents in Brooklyn Heights?

There is an influx of high-end rentals, which have come on the market through investors purchasing in the new condo projects. There is a high demand for those [luxury] units.
Robert Levine president & CEO, RAL Companies

What surprises you most about the Brooklyn Heights market now?

Our greatest surprise has been the overwhelming interest in our project [One Brooklyn Bridge Park] from areas outside of Brooklyn. We have a number of buyers from lower Manhattan as well as the Upper East Side. We have also had numerous buyers from Brooklyn Heights itself, as brownstone owners are choosing to opt for service-style condominium living and take advantage of the appreciation in value of their brownstones by selling.

What is the most negative aspect of the Brooklyn Heights market?

The limited parking available. Not unlike Manhattan, parking facilities have [been replaced by] development.

Which buyers are most and least active?

Buyers are making commitments to purchase after taking their time to see all of the options. They are clearly visiting properties throughout the city and making educated decisions, not compulsive buys. We are seeing buyers return to execute contracts three to five months after their initial visits and after having the opportunity to compare quality, location and the intrinsic value of the real estate.

How is the Brooklyn Heights market faring in relation to other parts of Brooklyn and to Manhattan?

I can only speak as it relates to One Brooklyn Bridge Park. We have just completed our first phase of the sales with occupancy anticipated in late March, and we have sold at an average price per square foot consistent with Manhattan due to our relationship to the waterfront and the soon-to-be-constructed Brooklyn Bridge Park. We have also experienced increased velocity during the months of January and February. We have only released our first phase over the past eight months. We have had approximately 10 price amendments to our offering plan. Most of those amendments were upward.

Any notable deals you’ve seen recently?

We have had multiple sales in the past week, two of which were a studio at $695,000 and a combination unit at $5.75 million.

What’s happening with rents in Brooklyn Heights recently, and how about relative to other parts of the borough?

We have rental properties in Brooklyn Heights that are apartments within brownstones. The demand for apartments is there; however, the cost of the brownstones and carrying costs relative to rentals is disproportionate. In my experience, the brownstones are more valuable as single-family residences.

Michael Guerra executive vice president, Prudential Douglas Elliman

What is the most positive aspect of the Brooklyn Heights market right now?

The impending sale of the Bossert Hotel, a luxury hotel on Montague and Hicks owned by the Watchtower. It is a beautiful building with a lot of history. It’s where [several of the] Brooklyn Dodgers used to live in the off-season. It’s like the Plaza or the Pierre of Brooklyn. It’s a 190,000-square-foot building with 220 rooms. It can be purely residential, a hotel or a combination of the two. I point to it because the new owner will have a property of such quality that they can achieve excellent prices per square foot regardless of how they use it. It could wind up achieving the highest prices we’ve seen in the neighborhood. Also, SL Green acquired 16 Court Street. What makes that notable is that a major player from Manhattan came into Brooklyn to make a buy.

What is the most negative aspect?

We don’t have enough family-size apartments. Condo developers’ favored product is the two-bedroom. The three-bedroom has certain inherent risks for the developer, but there is tremendous demand. Many buyers cannot afford to combine two two-bedroom apartments, nor is it feasible. So their choices are limited. Also, when the Bossert is developed, where are they going to put the cars? They’ll have to offer valet parking offsite and run them several blocks away. One Brooklyn Bridge Park is charging over $100,000 for a parking place.

Which sectors of the residential market are doing best and worst?

The $5 million price point in generic townhouse sales volume slowed dramatically. But you still can’t get a house in Brooklyn Heights for under $2 million.

Marilyn Donahue executive vice president, Prudential Douglas Elliman

What surprises you most about the Brooklyn Heights market right now?

I am seeing a lot of inflexibility from both sides. Sellers are running on the volume and velocity of previous markets and are not willing to adjust to the fact that things are slowing down. Buyers are coming in after reading nationwide that the market has dropped, and they get inflexible, so that can stall the market.

What is the most negative aspect?

Increase in density and traffic [in Brooklyn] because of new developments. It’s all the new development and people driving to work every day, to the hospitals, attorneys in downtown Brooklyn and City Hall. I am for resident parking [in the Brooklyn Heights vicinity] — it’s a landmark area, and we need some kind of protection so residents can park their cars.

What trends are you seeing among buyers in Brooklyn Heights?

The Brooklyn Heights buyer easily converts to Cobble Hill, Carroll Gardens, Boerum Hill and Park Slope. Co-ops, condos and townhouses in Cobble Hill, Carroll Gardens and Boerum Hill that are priced under $2 million or $2.5 million [are] a very strong market. Remember, what people are paying for co-ops and condos are what people would have paid for a house [in the past]. Years ago, people bought a house to create a home over time. Today, the minute they buy something, they are already anticipating how much they can sell it for. It has become a whole different buying game in real estate.

What’s the overall level of sales activity like compared to six months, a year or two years ago?

There was more activity six months ago, but historically, it slows down starting at about Thanksgiving through Christmas and January, and then it breaks open again in March. In August 2005, we began to see a shift in the Brooklyn market. Townhouses started to slow down. It was a combination of inventory and price. Prices were continuing to go up, and there was resistance to it from buyers. But it’s like the customer resists, and then they get used to it. They get sticker shock, and then they digest for a while. The next thing you know, they are buying the car.

What’s open house attendance like?

I have had as many as 90 people show up at a condo open house. At an appropriately priced townhouse open house, you get two to three offers the same day as the open house.

What is the situation like as far as consolidation among firms and the existence of independent brokerages?

The first one to sell to Corcoran was Melinda Magnett of Brooklyn Landmark Realty. Then Brown Harris Stevens bought William B. May, Prudential bought [my firm, Marilyn A. Donahue Real Estate], Halstead bought Bill Ross Realty and recently closed on Harborview Realty — and at the same time, two to three independent brokers opened on Court Street, which indicates the entrepreneurial spirit is still strong in spite of four giants having moved in.

Yolanda Johnson Vogelzang senior associate broker, the Corcoran Group

What surprises you most about the Brooklyn Heights market right now?

The neighborhood seems to be in as fine a shape as ever, with older properties undergoing extensive and expensive renovations, new buildings going up and acute interest from buyers, especially from Manhattan.

Which buyers and sellers are most active?

The most active buyers and sellers right now are between 30 and 45. Buyers are mostly high-income producers from Wall Street. Sellers generally have to move out of necessity [because of] children, schools or job relocation.

Have buyers’ and sellers’ mindsets changed recently?

We are in a tug of war between buyers and sellers, with buyers more demanding and bidding lower, and some sellers still hanging onto the notion that the sky is the limit. We as brokers have the responsibility to educate both groups and come to a happy medium.

Any notable deals you’ve seen recently that illustrate the state of the market?

Buyers are putting more equity in their transactions. I just sold an apartment doing an all-cash deal. Another apartment I recently sold with 60 percent down.

Arlene Waye president, Awaye Realty LLC

Which buyers and sellers are most active right now?

The Watchtower’s recent [building] sales have released a variety of properties, condos and rentals to the area, which has enabled all types of professionals to live in a neighborhood that once was untouchable. In addition, it has afforded additional housing for NYU and Brooklyn Law School students. On the other side of the spectrum, major investors have now been able to attain quality existing properties in Brooklyn Heights, instead of developing on the outskirts.

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