HOUSING MARKET TRENDS IN DOWNTOWN BROOKLYN

The housing market over the past five years has seen extremely high demand, as evidenced by rising rents, low occupancy rates and high renewals. Since 2018, the market has outperformed projections, and even broken records, according to real estate professionals.

Beginning with the COVID-19 pandemic, the market experienced a 12-month disruption. Local short-term shifts included: a 135% increase in the number of available apartments, a 17% decline in median rental prices, and changing preferences in the types and sizes of housing units sought in Downtown Brooklyn.8 In Spring 2021 the pandemic slowed and people began to move back to New York City, Downtown Brooklyn’s housing market quickly bounced back. Median rental prices increased by 50% from pandemic lows and the number of available apartments dropped by as much as 50%. 9 By late 2022, median rents had risen by 22% and the availability of rental apartments had decreased by 8%, from pre-pandemic levels in 2019.10

Rental building owners reported very strong demand, overall, for newly-constructed housing units. These new buildings generally achieved full lease-up between 5 and 12 months after entering the market. During 2021 and 2022, 5,000 new units entered the market, benefiting from the demand upswing. During peak leasing periods, some buildings reported up to 60 units leased per month. All developers interviewed greatly exceeded their underwriting projections. One property owner noted that their lease-up period for a particular building in Downtown Brooklyn was record setting for their entire New York City portfolio.

Housing occupancy in Downtown Brooklyn rental buildings remains consistent with pre-pandemic levels at 95%, according to Census data and confirmed by real estate professionals interviewed. Property managers also reported seeing strong renewals between 50% to 90%, despite renewal rent increases ranging from 4% to 8%. Low vacancy rates of 5% are an indicator of a continued gap in housing supply, and high renewal rates mean few units re-enter the market.

According to StreetEasy, the median monthly asking rent in Downtown Brooklyn rose from $3,300 in 2018 to $4,200 in 2022 – a dramatic 26% increase. In fact, median rents increased more in Downtown Brooklyn than in Manhattan overall, which saw median rents rise 22% from $3,260 to $4,000 during the same time period.11 “The phenomenon of rising rents is partially attributable to the quality of housing stock seeing significant improvement over time,” notes Jonathan Miller, President and CEO of real estate appraisal and consulting firm, Miller Samuel.

Also influencing rent increases was a pandemic-induced shift in housing preferences that favored Brooklyn over Manhattan. Real estate professionals noted that as residents transitioned to remote/hybrid work and sought out more space, Downtown Brooklyn became a desirable destination for residents seeking better housing options, while still providing easy access to core business districts.

There were also 20% fewer units being offered with concessions in 2022 compared to 2018.12 Concessions, such as free rent or waived amenity fees, are often used to quicken lease-ups, retain existing tenants, and attract new tenants. Several building owners noted that overwhelming demand rendered concessions unnecessary.

The number of rental listings available at any point has declined by 17% since 2018, despite steadily high occupancy rates.13 This means that while there are more apartments in the neighborhood, the demand for rental housing has outpaced the rate of new supply, leading to fewer units available for rent.