Downtown Brooklyn Q3 2023 Market Report

DOWNTOWN BROOKLYN Q3 2023 MARKET REPORT Updated quarterly, this report provides insight on real estate market data, development progress and commercial leasing activity in Downtown Brooklyn.

DEVELOPMENT SNAPSHOT Downtown Brooklyn Partnership’s (DBP) Development Matrix captures projects that have been completed since the 2004 Downtown Brooklyn rezoning, including development activity, project status and anticipated completion dates.

COMPLETED PROJECTS (SINCE 2004)

22,078 housing units

2.8 M office sq. ft.

2,368 hotel rooms

UNDER CONSTRUCTION + PIPELINE PROJECTS

7,982 housing

375 K

103

office sq. ft.

hotel rooms

For more detail information, please see the full Q3 2023 Development Matrix summary and map at: https://www.downtownbrooklyn.com/news/report/downtown-brooklyn-development-matrix/ Downtown Brooklyn Partnership

Q3 2023 Market Report | 1

COMMERCIAL OFFICE COMMERCIAL OFFICE LEASING 532 Fulton Street, Jenel Management’s new 43-story, mixed-use tower, signed an 18,044 sq. ft. lease with the NYC Department of Health and Mental Hygiene.

The space will be used by the department’s Bureau of Children’s Services, relocating from 16 Court. Last year, the U.S. Citizenship and Immigration Services signed a 54,132 sq. ft. lease. Approximately two-thirds of the 109,000 sq. ft. office space is leased in the tower.

25 Chapel Street renewed its 9,199 sq. ft. lease with the NYC Department of Human Resources Administration (HRA). HRA uses the space for the Michael J. Handy Veteran’s Service Center which has occupied the space since 2001.

Heart to Heart Homecare, a home health and personal care aide service provider, signed an 11,000 sq. ft. lease at 1 Smith Street, relocating from a block away at 423 Pearl Street.

COMMERCIAL OFFICE VACANCY + RENTS In the third quarter of 2023, the office market in Downtown Brooklyn faced significant challenges, with overall average rental rates decreasing 4.3% over the past quarter to $55.64. Concurrently, overall average vacancy rates held steady at 22% in the third quarter.

The combination of limited leasing activity and declining rents indicate a challenging landscape for Downtown Brooklyn’s office market.

Comparatively, Manhattan’s submarkets remained relatively stable during the same period. Overall rental rates across all three Manhattan submarkets (Lower Manhattan, Midtown South and Midtown) saw minor decreases over the past quarter. Office rental rates in

Midtown and Midtown South both average in the mid $70s, while Downtown Brooklyn and Lower Manhattan are competitive, hovering around $55 per square foot.

Overall vacancy rates across all these markets range between 21% to 24%. This shift, occurring within the past year, has reshaped market dynamics, erasing Downtown Brooklyn’s reputation as the budget-friendly choice. Companies now have increased flexibility in choosing office spaces within Manhattan, marking a notable change in the city’s office market landscape.

Overall Office Vacancy by Submarket Q3 2023

Q2 2023

Q3 2022

QoQ Change

YoY Change

Downtown Brooklyn

22.0%

22.0%

18.1%

0 bps

+390 bps

Lower Manhattan

23.9%

24.2%

22.3%

-30 bps

+160 bps

Midtown South

22.4%

23.0%

21.7%

-60 bps

+70 bps

Midtown

21.4%

21.7%

21.8%

-30 bps

-40 bps

(basis points)

(basis points)

Source: Cushman and Wakefield

Overall Average Asking Rent PSF by Submarket Q3 2023

Q2 2023

Q3 2022

QoQ Change

YoY Change

Downtown Brooklyn

$55.64

$58.09

$56.81

+4.3%

-2.1%

Lower Manhattan

$55.86

$56.27

$56.09

-0.7%

-0.4%

Midtown South

$75.69

$75.84

$73.81

-0.2%

+2.6%

Midtown

$76.70

$77.05

$75.27

-0.5%

+1.9% Source: Cushman and Wakefield

Downtown Brooklyn Partnership

Q3 2023 Market Report | 2

ACADEMIC NYU Tandon School of Engineering unveiled its Nanofabrication (NanoFab) Classroom at 5 Metrotech. NYU NanoFab, the only such academic facility in Brooklyn, will be available to all NYU faculty and students, and to the academic and tech communities in Brooklyn and beyond.

NYU Tandon NanoFab Classroom

The state-of-the-art facility offers notable capabilities for processing emergent semiconductors and quantum materials. NYU and other New York academic institutions are part of a consortium that helps fulfill the promise of the bipartisan CHIPS and Science Act, which aims to bolster U.S. chip manufacturing to meet growing global demand, and to support related research and development and workforce cultivation.

Credit: NYU Tandon School of Engineering

RETAIL NEW RETAIL LEASES ACROSS DOWNTOWN BROOKLYN Downtown Brooklyn saw 19 new retail openings and several new leasing announcements during the third quarter of 2023. Highlights include: •

Several new retail tenants are opening and nearing completion at 11 Hoyt. Pilates fitness chain, [solidcore] and Jack’s Stir Brew Coffee both opened. Later this winter, indoor golf simulator and lounge, Golfzon, will open a new 18,000 sq. ft. entertainment complex in the building’s lower level.

•

Maison Sun, a fine dining restaurant offering tasting menus, opened at 200 Schermerhorn Street. The restaurant replaces Chef’s Table at Brooklyn Fare that left the space in 2016.

•

Mighty Quinn’s BBQ debuted its newest location at 1 Boerum Place. Nan Xiang Express, a popular NYCbased Chinese cuisine chain known for its soup dumplings, opened at 148 Lawrence Street.

•

Quality Greens Kitchen, a healthy fast-casual restaurant originally based in NJ, opened it’s first NYC establishment at 57 Willoughby Street.

Downtown Brooklyn Partnership

•

Two new grocery stores have been announced on Fulton Street. The Fresh Grocer, a New Jersey-based supermarket is opening a 21,000 sq. ft. store at 523 Fulton Street – the first grocery store on Fulton Mall.

Additionally, Gourmet Glatt, announced a new 26,500 sq. ft. supermarket store at the large apartment building under construction at 625 Fulton Street.

•

Wonder, a new concept offering only food delivery and takeout service from over 15 restaurants, opened at 310 Schermerhorn Street.

•

Additional eateries opening soon include: Raising Cane’s at 445 Fulton Steet, 7th Street Burger at 400 Jay Street, and Patis Bakery at 203 Jay Street.

Q3 2023 Market Report | 3

RETAIL NEW RETAIL LEASES AT CITY POINT City Point is debuting deveral notable tenants in the sports and entertainment category. Court 16, a tennis and pickleball club, opened August 28 on the fourth floor. The facility includes 26,000 sq. ft. for eight courts for tennis courts or pickleball. On the horizon, The Escape Game, a popular national escape room chain, will be coming to Dekalb Market in early 2024.

DIG.

City Point is also welcoming the addition of several new dining offerings, including: • Brazilian steakhouse chain Fogo de Chão will open at full-service restaurant and bar. The steakhouse will take over 9,000 sq. ft. of the former Brooklyn Studios event space. Construction is underway and is anticipating a late 2023 opening.

•

•

DIG, the healthy fast-casual chain, opened at Brooklyn Point at the corner of Willoughby Street and Albee Square West. Also coming soon to the base of the tower: Wright and Goebel wine and liquor store, One Medical and GoodVets.

Credit: DIG.

Court 16

Dekalb Market Hall continues to refresh its vendor offerings with its latest opening, Harlem Seafood Soul. Italian sandwich shop, Alidoro, is opening in the coming months.

Credit: Court 16

CULTURAL OPENINGS After an extensive renovation, The Center for Brooklyn History (CBH) opened to the public at 128 Pierrepont Street. CBH was formed in 2020 by uniting the Brooklyn Historical Society (BHS) and the Brooklyn Public Library, combining materials collected over the past 157 years

by BHS with BPL’s Brooklyn Collection and becoming the most expansive catalogue of Brooklyn history in the world.

Downtown Brooklyn Partnership

The L10 Arts and Cultural Center at 300 Ashland Place is wrapping up interior construction. The 50,000 sq. ft. cultural center will have three cinemas and other spaces for the Brooklyn Academy of Music, a gallery and performance space for the Museum of Contemporary African Diasporan Arts (MoCADA), a new branch for the Brooklyn Public Library, and studios and performance space for 651 ARTS.

Q3 2023 Market Report | 4

RESIDENTIAL RESIDENTIAL RENTS The average residential rent in Downtown Brooklyn was $4,736 in September 2023, slightly down 0.4% yearover-year. However, while overall average rents were down, studio rents were up 3% and one-bedroom were up 0.5%. Conversely, two-bedroom unit rents were down 2.9% year-over-year.

Overall, average rental pricing across Brooklyn increased by 2.3% since last year to $3,695. Neighborhoods with the largest year-over-year increases in rents were Borough/Sunset Park (11.7%), Crown Heights (8.9%), Boerum Hill (8.6%) and Park Slope (8.3%). While Downtown Brooklyn saw a small overall decrease, several neighborhoods also experienced a rent decline including Fort Greene (-5.7%), Cobble Hill (-1.8%) and Brooklyn Heights (-1.1%).

Average Residential Rents in Downtown Brooklyn September 2023

September 2022 Change

September 2021 Change

September 2020 Change

Studio

$3,562

3.0%

14.9%

49.7%

1-Bedroom

$4,397

0.5%

17.2%

49.1%

2-Bedroom

$6,248

-2.9%

22.1%

51.5%

Average

$4,736

-0.4%

18.7%

50.3% Source: MNS

Average Residential Rents in Downtown Brooklyn by Unit Size, 2020-2023 $7,000

$7,000

$6,000

$6,000

$5,000

$5,000

$4,000

$4,000

$3,000

$3,000

$2,000

$2,000

$1,000 Jan-20

May-20

Sep-20

Jan-21 Studio

May-21

Sep-21 One Bed

Jan-22

May-22

Two Bed

Sep-22

Jan-23

May-23

$1,000 Sep-23

Average Source: MNS

Downtown Brooklyn Partnership

Q3 2023 Market Report | 5

RESIDENTIAL RESIDENTIAL SALES The median sales price in Downtown Brooklyn for new condominiums was $1.99 million in Q3 2023, a 2.6% increase from last quarter, but a 5.7% decrease yearover-year. The median price per square foot dipped 2.8% year-over-year to $1,650. Two and three-bedroom units comprised the bulk of sales in the third quarter, at 48% and 32% respectively.

Downtown Brooklyn sales accounted for 6.7% of Brooklyn sponsor sales volume with 25 units sold in the third quarter. Williamsburg and Bed-Stuy accounted

for the most sales this quarter, at 56 and 50 sold units, respectively.

Across Brooklyn, the median price per square foot decreased by 20.7% year-over-year, from $1,592 to $1,262. Brooklyn’s overall median sales price also decreased by 26%, from $1,702,500 to $1,097,000. The sharp decreases in pricing is attributed to high interest rates.

Median Residential Sale Price Per Square Foot - Downtown Brooklyn New Development Q3 2023

QoQ Change

YoY Change

Studio

$1,702

-

-1.2%

1-Bedroom

$1,678

-2.1%

-1.1%

2-Bedroom

$1,628

-1.6%

-2.2%

3-Bedroom+

$1,714

+14.2%

+0.6%

All

$1,650

-1.7%

-2.8%

Source: MNS (Q3 2023). Data includes first-offering sponsor sales at walk-up and elevator new development condominium buildings, as well as new conversion condominiums if the sales were applicable sponsor transactions. Cooperative sales are excluded from this data.

Median Residential Sales Price Per Sq. Ft. - Downtown Brooklyn New Development $1,900

$1,700

$1,500

$1,300

$1,100

$900

$700

$500

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Q1 2022

Q2 2022

Q3 2022

Q4 2022

Q1 2023

Q2 2023

Q3 2023

Source: MNS

Downtown Brooklyn Partnership

Q3 2023 Market Report | 6

TRANSPORTATION PEDESTRIAN + COMMUTER ACTIVITY In the third quarter, foot traffic throughout the neighborhood was up nearly 5% compared to the same time last year, equating to almost 4,000 more daily pedestrians. Specifically, July foot traffic was up 15% year-over-year, and August was up 6%. However, yearover-year foot traffic was down nearly 6% in September 2023 as several extensive rain storms throughout the month that kept pedestrians indoors. As a whole, the neighborhood has recovered 67% of pre-pandemic foot traffic.

During the third quarter, the corner of Smith Street and Livingston Street saw an 11% increase in pedestrian activity year-over-year. The Brooklyn Commons entrance

along Jay Street saw a 8% increase in activity. The primary locations that experienced a decrease in activity occurred at Fulton & Adams Streets and at Willoughby Square, which were down 14% and 9% respectively. We expect these trends to reverse now that the sidewalk scaffolding has come down along Adams Street and new retail opens.

Weekends slightly outperformed weekdays in terms of year-over-year growth with an 8% increase in foot traffic, compared to a 4% increase during weekdays.

However, weekdays continue to be the busiest days with 91,000 daily pedestrians, compared to 66,000 during the weekends.

Downtown Brooklyn Average Daily Foot Traffic by Location, Q3 2019-2023 Foot traffic was up a total of 15% and 6% YOY in July and August respectively, but poor weather throughout September brought overall foot traffic down in Q3.

Source: Springboard ** The sharp YOY rise in foot traffic at Fulton + Hanover is due to construction at 565 Fulton Street diverting pedestrian traffic to this intersection.

Downtown Brooklyn Partnership

Q3 2023 Market Report | 7

TRANSPORTATION SUBWAY RIDERSHIP In September, average daily subway ridership across all Downtown Brooklyn stations saw a notable 6% increase year-over-year. On average, there were about 6,800 more daily riders in September 2023 than in September 2022.

Currently, average daily ridership has recovered 87% of 2019 levels across all Downtown Brooklyn stations.

This comes at a time when city-wide subway ridership has reached record levels since the pandemic, hitting over 4 million daily riders on multiple days in September, according to the MTA. Weekday ridership experienced 10% increases across all stations year-over-year, compared to just 3.4% increases on weekends. The notable rises in subway ridership in office-centric parts of Downtown Brooklyn suggests many workers have returned to their desks as companies push their employees to return to their offices. Similar increases

are also being seen in office-heavy parts of Lower Manhattan and Midtown.

• The Court St (R)/Borough Hall (2,3,4,5) station experienced a substantial increase in daily activity, up 38% year-over-year. The station has recovered 96% of pre-pandemic levels.

• The Dekalb Ave (B,Q,R) station saw annual increases of 37%. In fact, the station saw average daily ridership 47% above 2019 levels.

• Additionally, the Jay St/Metrotech station (A,C,F,R) saw a 17% year-over-year increase in September.

• The only two Downtown Brooklyn subway stations with less subway ridership year-over-year were Atlantic Ave/Barclays Center and Nevins St, down 2% and 5% respectively.

Downtown Brooklyn Average Daily Subway Ridership by Station, September 2019-2023

Source: MTA

CITI BIKE RIDERSHIP Over 100,099 Citi Bike riders utilized one of Downtown Brooklyn’s 19 Citi Bike stations in September 2023, a 4.2% decline from the previous year. The decline in bike ridership can be correlated with the decline in pedestrian activity, as several extensive rain storms throughout the month kept pedestrians indoors.

Since 2019, Citi Bike usage has increased nearly 40% in Downtown Brooklyn, with the increase correlating to the popularity of bicycle transportation citywide. Over the past year, Citi Bike has been adding capacity at existing stations across the city, as well as expanding further into the boroughs and DOT has added bike infrastructure with the redesign of Schermerhorn Street.

Downtown Brooklyn Partnership

The top five Citi Bike stations in Downtown Brooklyn during September 2023 are: Docking Station

Rides

Hanson Pl & Ashland Pl

11,379

Fulton St & Adams St

8,721

Lawrence St & Willoughby St

8,419

Bond St & Fulton St

7,276

Atlantic Ave & Fort Greene Pl

6,720 Q3 2023 Market Report | 8

RESIDENTIAL RESIDENTIAL RENTS DEVELOPMENT OVERVIEW As of Q3 2023, Downtown Brooklyn development includes: • • •

142 projects completed since the 2004 rezoning, including 22,078 residential units (of which 4,510 units are affordable), 2.7 million square feet of office space and 2.4 million square feet of retail.

20 projects under construction with 5,894 residential units (1,499 of which are affordable) and nearly 250,000 square feet of retail.

Another 20 projects planned, including 2,088 residential units (of which 390 will be affordable).

22,078 residential units completed across 105 projects

5,894

residential units under construction across 19 projects

2,088

residential units planned across 10 projects

RESIDENTIAL ONGOING CONSTRUCTION RENTS •

131 Concord Street: Bruklyn Builders has wrapped up construction on its 13-story, 73 rental unit building and leasing has begun.

•

The Alloy Block at 505 State Street: Alloy Development’s 44-story building will include 440 rental units, including 45 units of affordable housing.

The building is aiming for a temporary certificate of occupancy by year-end with the first residential occupancy expected in spring 2024. The two schools will be operational by fall 2024. DOT also added a signalized crosswalk on Flatbush Avenue at State Street. Phase two at 80 Flatbush Avenue will include a second, larger tower and will include residential, office space and a cultural center.

•

•

240 Willoughby Street: Adjacent to The Brooklyn Hospital campus, 595 andCenter 615 Dean StreetRabsky Group’s 30-story, 300-unit building at 240 Willoughby Street topped out. The tower, fronting Fort Greene Park, will include 147 affordable units. Rabsky is also renovating the existing 21-story, 189-rental-unit tower at the site.

The new tower is slated for completion in mid-2024.

625 Fulton Street: The structure of Rabsky Group’s 35-story residential building recently topped out this past summer. The building will have 1,044 rental units, with 313 affordable units, and a 250-car parking garage. Additionally, there will be 46,000 sq. ft. of commercial retail space, including a 26,000 sq. ft. grocery store. The building is anticipated to be completed in 2025.

Downtown Brooklyn Partnership

•

15 Hanover Place: Lonicera Partners’ 34-story tower topped out on the corner of Hanover + Livingston.

The project will include 314 rental units, 95 of which are affordable, and 9,000 sq. ft. of retail space.

Completion is estimated in late 2024.

•

111 Willoughby Street: The superstructure of Triangle Equities/The Michaels Organization’s project has passed the 6th floor. The 40-story tower will bring 227 rental units, 69 of which will be affordable. There will also be a 20,000 sq. ft. ministry center for the neighboring Oratory Church of St. Boniface. The site includes 16,000 sq. ft. of air rights transferred from 115 Willoughby Street. The development is slated for completion in Spring 2025.

•

180 Ashland Place/98 DeKalb: Rockrose continues foundation work on its 49-story residential tower.

Located across from The Brooklyn Hospital Center, the tower will yield 569 rental units, 171 of which will be affordable. Completion is expected in 2025.

•

The Brook at 565 Fulton Street: Witkoff and Apollo have wrapped up foundation work for The Brook at 565 Fulton Street. Superstructure construction will begin in October. The 51-story tower at Fulton and Flatbush will have 591 rental units, including 178 affordable units. The project also includes 25,000 sq. ft. of retail space at the base of the tower and a jewel-box site next to Albee Square.

Q3 2023 Market Report | 9

RESIDENTIAL RESIDENTIAL RENTS ONGOING CONSTRUCTION (continued) •

9 Chapel Street: Tankhouse Development is wrapping up construction on its 13-story building that will include 27 market-rate condo units.

Completion is estimated in early 2024.

•

19 Rockwell Place: Brookstone Developers has begun foundation work on an 27-story building with 174 units, including 7 affordable units. The previous building has been demolished and foundation work has begun.

RESIDENTIAL RECENTLY STARTED RENTSCONSTRUCTION •

55 Willoughby Street: Foundation work continues for Lonicera Partners’ 38-story, 295-rental unit residential tower. The building will include 89 affordable units and 3,500 sq. ft. of retail space.

Nearly 107,000 sq. ft. of air rights were transferred from 57 Willoughby Street.

•

570 Fulton Street: Developing NY State filed plans for a 23-story, 163-rental unit residential tower (including 33 units of affordable housing). The building will also have 5,200 sq. ft. of commercial space. The vacant site was sold for $24 million by Davis Companies in early 2023.

•

89 DeKalb Avenue: RXR started foundation work on a 30-story, 324-unit tower (98 units will be affordable) in late October. Approximately 55,000 sq. ft. of academic and office space will be used by Long Island University at the base. The tower will be fully electric-powered.

•

150 Lawrence Street: Twin Group Associates completed demolition of a four-story building, and excavation and foundation work will begin this fall for a 25-story, 101-condo unit residential building.

The tower will have 8,200 sq. ft. of retail space.

•

101 Fleet Place: The Jay Group continues environmental cleanup at the brownfield site that began in February 2023. Remediation is expected to last seven months. A 21-story, mixed-used tower is planned at the site and will have 292 units and 205,000 sq. ft. of commercial space.

•

236 Gold Street: Joel Schwartz began foundation work on a 5-story, 13-unit residential building. The site was most recently a parking lot.

•

362-370 Livingston Street: Developing NY State continues demolition work on an existing 8-story building to make way for a proposed 22-story, 105-unit residential development. The building will include 7,162 sq. ft. of retail space.

•

540 Atlantic Avenue: JCS Realty filed plans for an 8-story, 154-unit tower. The residential building will include 39 parking spaces. Demolition permits for the existing five-story building were recently filed.

RESIDENTIAL NEWLY ANNOUNCED RENTS DEVELOPMENTS •

95 Rockwell Place: Charney Companies announced plans to build a 38-story, 158-condo unit tower.

The building will also include 33,000 sq. ft. of commercial space. The site includes over 47,000 sq. ft. of air rights from Mark Morris Dance Group.

The site was originally planned for a 200-key hotel. Demolition permits for the existing five-story building were recently filed.

Downtown Brooklyn Partnership

Q3 2023 Market Report | 10

IN THE NEWS RESIDENTIAL

NJ supermarket owners bringing The Fresh Grocer to Fulton Street Mall

Manhattan Smash Burgers Are Coming for Brooklyn

Developers Break Ground on New, AllElectric Apartment

Downtown Brooklyn Partnership

NYC Health Department Takes 18K SF in Downtown Brooklyn

EXCLUSIVE: A look inside 1 Willoughby Sq. Brooklyn’s tallest office building

A massive indoor tennis and pickleball club is opening at Brooklyn’s City Point

Fort Greene’s MoCADA opens new Ubuntu Garden with sculptural series of ‘Living Legends’

‘Trash bots’ have been helping keep Brooklyn’s Albee Square clean

Public High School in Downtown BK with Special Focus on Design, Social Justice

SO – IL, Tankhouse, and GUBI unveil 9 Chapel, a new landmark tower for Downtown Brooklyn

New elevator unveiled at Hoyt Street subway station

A New Home for Brooklyn History: ‘Everybody’s Story Is Here’

Q3 2023 Market Report | 11