Was the Brooklyn office craze a bust?

From the July issue: When Brooklyn’s most heralded startup, the online marketplace Etsy, inked a 200,000-square-foot lease at Dumbo Heights in July 2014, many saw it as confirmation of a long-held hypothesis: If landlords provided new office space in the borough, then companies would be willing to sign massive leases at super-high rents.

But since Etsy agreed to anchor RFR Realty and Kushner Companies’ 1.2 million-square-foot redevelopment project, Brooklyn’s office market has gone from underserved to bloated as eager developers head deeper into the borough.

And while some developments — such as Midtown Equities, HK Organization and Rockwood Capital’s Dumbo office complex Empire Stores and Rudin Management and Boston Properties’ tech-focused Dock 72 at the Brooklyn Navy Yard — have seen success, others are facing the cold, hard truth of supply and demand in more untested office markets like Red Hook, Sunset  Park and Bushwick.

“There was a perception in Brooklyn that tenants would come as long as it is ‘cool,’” said Whitten Morris, head of leasing in Newmark Knight Frank’s Brooklyn office.

Indeed, the numbers show that developers thought demand for hip offices would take off: There are 23 office projects underway in Brooklyn, which will add roughly 6.9 million square feet to the market by 2020, according to Cushman & Wakefield. The amount of new supply accounts for roughly 20 percent of Brooklyn’s 45 million-square-foot market, whereas in Manhattan, new office supply makes up about 7 percent of the market, Colliers International data shows.