Brooklyn is today a much hotter place to invest in than Manhattan, says TerraCRG founder Ofer Cohen.
In March 2012, something happened in the Big Apple: Sarah Jessica Parker and her husband, Matthew Broderick, decided to leave the West Village in Manhattan, and they bought a house in Brooklyn Heights. Parker, as the character Carrie Bradshaw, was a symbol of the eternal love of the Manhattan neighborhood. In an episode of the television series, in which Miranda told her three girlfriends that she and her family were moving to Brooklyn, her friends officially declared mourning that the Brooklyn Bridge and a few subway stops now separated them from their red-haired friend.
Nonetheless, prices in some Brooklyn neighborhoods, especially those close to Manhattan, have narrowed the gap to apartment prices in Manhattan, and even exceeded them in some cases. For example, Brooklyn Heights, which has a view of the Statue of Liberty and is just one subway stop from Wall Street, is the most expensive neighborhood in Brooklyn, and it has absorbed former Manhattanites like Parker and Broderick. Neighborhoods such as Williamsburg and Crown Heights, for which there was once no demand at all, have become fashionable and attracted young people and modern businesses. Bedford Avenue in Williamsburg, which more or less resembles Sheinkin Street in Tel Aviv in its better days, draws large numbers of artists and there is strong demand for office and residential space.
According to “Bloomberg”, the median price of a 1-3 room apartment in Brooklyn was $550,000 in the second quarter of 2013, 15% higher than in the corresponding quarter in 2012. Manhattan covers 60 square kilometers, while Brooklyn covers 250 square kilometers and has 2.5 million residents. In 2003, Brooklyn released millions of square meters of industrial space for residences in Williamsburg and Green Point, both of which are across the East River from Manhattan. This resulted in a construction boom, which the sub-prime crisis turned into abandoned building sites by 2010. Construction is only now resuming at some of borough’s abandoned sites, indication of a slow recovery.
The mass of construction in Brooklyn is now concentrated in rental residential projects, because they are lower risk than building residential apartments for sale.
TerraCRG founder Ofer Cohen, who specializes in commercial properties in Brooklyn says, “2011 was the first year of recovery, with a doubling of activity from 2010 to 2011. For us, this was an opportunity in a market that was starting from zero. Brooklyn is today a much hotter place to invest in than Manhattan. People believe that Brooklyn has not yet maximized prices like in Manhattan, and there is room for a further rise in prices. In 2003-08, industrial land in downtown Brooklyn was rezoned for residential use and increased building rights from three to 32 floors. This created the potential for millions of square meters of residential space, so there are landowners with an interest to sell properties to developers.
“Since 2010, rents have risen 10% a year. As a consequence, even now, 95% of the apartments under construction in Brooklyn are for rent, which means that there are few apartments to buy. In Williamsburg, the average rent rose from $450 per square meter in 2010 to $650 per square meter in 2013. Therefore, there is less risk is building rental apartments than building for sale,” says Cohen.
“Israeli insurance companies seeking high yields from rental projects (which do not yet exist in Israel) are going around Brooklyn looking for deals. Since there is no inventory of new apartments for sale, there is still demand to buy them. In contrast, banks are still afraid of financing projects of hundreds of apartments for sale. Developers see the opportunity, but the bank looks at the risk.”
Artists and gays were the first
Brooklyn Borough President Marty Markowitz told “Globes”, “Over the years, it has become increasingly difficult to live on an average salary without parents who can provide the equity to buy a home. There are neighborhoods in Brooklyn where it is easier to buy an apartment, but they are not the buyers’ first choice. Nevertheless, we’ve already seen that the higher demand neighborhoods were once very unattractive, and the pioneers who identified them were artists, gays, and lesbians. They were followed by families to these apartments.”
Markowitz adds that the difference in apartment prices in high-demand Brooklyn neighborhoods has narrowed compared with Manhattan, and that the quality of life in Brooklyn is better. “Our neighborhoods are full of families with children, because the conditions here are better for families. In Manhattan, you don’t see the sky, but you see it in Brooklyn, and this should not be taken for granted. Even Manhattan’s nightlife can now be found in Williamsburg, which attracts young people. It reminds me of the 1960s, when I would go to Greenwich Village in Manhattan.”