Red Hook’s revival picks up after Sandy
The storm-damaged neighborhood gets back on its feet, but other challenges await
For years, real estate insiders have been pointing to Red Hook as the next hot Brooklyn neighborhood, predicting an explosion in sale prices and activity in the long-industrial neighborhood.
But due to the real estate downturn and other factors, that never quite materialized. And in October, when Hurricane Sandy dealt a harsh blow to the neighborhood, many real estate pros counted Red Hook down for the count.
The neighborhood is now finally recovering from Sandy: Last month, its 52,000-square-foot Fairway Market finally reopened its doors after being closed by the storm.
Some local businesses, including Steve’s Authentic Key Lime Pies and Chelsea Garden Center, timed their own post-storm reopenings to Fairway’s debut.
“The storm was a hiccup, so to speak, and that hiccup is going to be gone soon,” said Greg O’Connell, Sr., who owns a number of buildings in the neighborhood, including the one that Fairway is located in. “No one denies it was hard, but [businesses are] more determined to make it work now.”
Christopher Havens, the director of commercial property at Brooklyn-based brokerage aptsandlofts.com, told The Real Deal that commercial sales and leasing activity in Red Hook is on pace with last year’s volume level. While he said data is thin for Red Hook, he estimated that inventory is up 10 to 15 percent because of the storm.
“There is a little more inventory available … about 10,000 square feet,” he said, adding that it “wasn’t a significant amount of space given the intense demand in Brooklyn.”
The residential market did see a slower-than-normal winter due to the storm, said Tina Fallon of the brokerage Realty Collective, though activity is now picking up.
Sales prices in Red Hook dropped 22 percent between 2011 and 2012 (that number might be skewed by the small number of sales in the neighborhood in general), according to data from Miller Samuel Appraisers, and it’s too early to measure Sandy’s full impact on the market there, said firm CEO Jonathan Miller.
Nonetheless, some developers continue to be bullish on the neighborhood.
Matthew Steer, an agent at Town Residential, said he will soon be marketing a new residential project in the area with Town colleague Mark Chin. Steer declined to name the developer, but said a groundbreaking on the 18 loft apartments and eight townhouses, which are located on Sullivan and King streets, is expected in the next year.
He said he’s hoping to lure buyers who’ve been priced out of pricier areas like Cobble Hill or Park Slope.
Meanwhile, Italian development firm Estate4, founded by Alessandro Cajrati Crivelli, purchased a 130,000-square-foot factory space in Red Hook for $11.8 million in November. The developer has tapped architecture firm Adjmi & Andreoli to transform the space, which is at 202 Coffey Street, into a photography school and series of artist studios. In total, Estate4 has invested in three major properties in Red Hook, including the Coffey Street site and a property on Imlay Street, according to the company’s website. The latter property will reportedly become a 72-unit, mixed-use, condo loft building.
Estate4 couldn’t be reached for comment.
Still, some industry insiders said the neighborhood still faces a number of hurdles that must be overcome in order to achieve the kind of price appreciation now prevalent in prime Brooklyn areas.
The neighborhood doesn’t have an easily accessible subway, a fact which has long been cited as a reason for its inability to gentrify in the way so many other parts of Brooklyn have. And it’s largely zoned for industrial, manufacturing and commercial uses.
Miller said Red Hook’s new designation by the Federal Emergency Management Agency, or FEMA, as part of “flood zone A” could also hold back the neighborhood’s growth by making it harder for buyers in the neighborhood to get loans.
“I don’t think it takes away from the future potential of Red Hook, but it may just restrain the pace of growth,” Miller said.
Steer and Chin said they aren’t concerned about the possible change, however.
“We will just have to take the regulations into account in our selection of materials and in the way we design the building,” Steer said. “There is such a demand for space that if one buyer is discouraged because of the zoning, then another will just take it.”
The new map specifies that properties in Zone A should be constructed three feet above the so-called “base flood elevation” or face higher insurance premiums. (FEMA’s guidelines indicate that the owner of a property four feet below that level could face annual premiums as high as $9,500, versus the $427 they would pay at three feet.)
Chin said the only property he’s seen change hands in the last month achieved the same asking price the seller had been asking before the storm.
“It’s the only data point I have, but it’s good; they didn’t lose a cent on that sale,” he said.
Tim King of CPEX Real Estate said the neighborhood has had “great momentum” and he doesn’t expect it to stop now.
“I suspect that by the end of the year the hurricane will be a footnote in history,” he said.