Rental market drives Brooklyn commercial deals

Dollar volume of commercial transactions up 77 percent in first half of 2012

A rise in Brooklyn residential rents, which in May were up 10 percent year-over-year, may be having an effect on the volume of commercial transactions in the borough. Brooklyn commercial real estate deals were up 33 percent year-over-year for the first half of 2012, while the dollar volume of those deals increased by 77 percent, according to a report released today by Ariel Property Advisors.

May is the most recent month for which residential rental data is available.

“The recovery in Brooklyn’s commercial real estate market is being driven by a variety of factors, notably the drastically improving rental market, today’s low interest rates, and increasingly favorable macroeconomic conditions,” said Jonathan Berman, vice president of Ariel. “Highly desirable, and even more up and coming areas, are reporting rent increases of 10 percent.”

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The borough saw a total of 219 commercial transactions, including development, multi-family and industrial sales, in the first half of the year, comprised of 303 buildings. The total dollar volume for those transactions was $1.14 billion. In the first half of 2011, by comparison, there were 165 transactions composed of 245 properties, with dollar volume totaling $645.6 million.

Institutional capital is now offering Manhattan-level prices for Brooklyn properties, including residential rental buildings, Ariel concluded, while increased demand for multi-family properties is driving down cap rates.

As The Real Deal previously reported, the rise in commercial deal volume may be set to continue, with Brooklyn landlords looking to cash in on the demand for Brooklyn rental product. The HK Organization is currently listing its 87-unit Vinegar Hill property at 99 Gold Street for sale with Massey Knakal Realty Services, five years after the building made the switch from condominium to rental. The listing comes online in the wake of several pricey Brooklyn rental building sales, including properties such as 111 Kent Avenue and 175 Kent Avenue.