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Brooklyn investment sales market in post-421a purgatory

Sales volume tumbles from record levels in H1 2015

Brooklyn’s investment sales volume tumbled in the first half of 2016 as the expiration of the 421a tax abatement program exacerbated a cyclical slowdown, according to a new report by brokerage TerraCRG.

About $3.62 billion worth of commercial property deals closed in the borough until June 30 – down 30 percent from a record $5.13 billion during the same period last year. The number of transactions fell by 24 percent, down to 711 from 1,011 a year ago.

But brokers are optimistic creatures by nature, and TerraCRG’s [TRData] founder and CEO Ofer Cohen pointed out that sales were still strong by historical standards.

Last year, he said, “was a crazy year. We’re basically going back to more normal levels.” Cohen forecasts around $6.5 billion in deal volume for the full year, close to the $6.85 billion in deals recorded in 2014 but well below the $9.5 billion recorded in 2015.

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January’s expiration of the 421a program for rental development put a damper on development-site deals, which fell 44 percent year-over year.  The number of retail deals fell by 33 percent year-over-year, while the number of multifamily deals fell by 23 percent.

While sales volume fell, prices didn’t, Cohen said – in part because many property owners don’t need to sell.

“When the market isn’t as speculative,” he said, “there is less of a reason for discretionary sellers to put properties on the market.”

Greater Downtown Brooklyn saw $1.22 billion in deals in the first half of the year, leading all submarkets followed by North Brooklyn at $694.2 million. Earlier this week, Related Companies added to North Brooklyn’s tally by buying a Williamsburg rental portfolio for $60 million.