Brooklyn Q2 2024 State of the Market

Welcome everyone. I'm James Nelson, principal and head of Tri State Investment Sales here at Avison Young. And I am thrilled to have with us today Pat Madigan and Fritz Richter who are both directors handling our borough sales. And today we are going to be talking about Brooklyn. Some incredible green shoots to report activity which we love to see. If you all did not already see our webinar that covered the entire New York City investment sales market that is out as well. We reported that New York City, when you annualized 2024 sales over 23 the increase 39%. Manhattan registered a 51% increase in dollar volume when annualized. But Brooklyn is certainly on its way as well. So Fritz, tell us what happened in the second quarter of 2024 for investment sales in Brooklyn.

Yeah, thanks James. So the big green shoot that we're talking about today is that dollar volume in the second quarter was up 106% compared to Q1. Right. So we saw a massive uptick in terms of dollar volume. We only saw a property sales increase of about 10% across the board. But really what we're looking at right now is we're looking at an annualized sales volume just below where we were in 2023. For the listeners knowledge, that is going to be about 40% off of the historic average when you think about 2018-2022. But all in all we're seeing a great sort of disbursement of where sales are happening across asset classes. Right. We've got 32% of our sales volume in the specialty world. We've got about 21% in the multifamily world and 27% in the development world. Right. So we're seeing investor appetite across the institutional high net worth, foreign buyers, users coming into play and you know, successfully closing on deals. So it's been, it's been exciting in terms of dollar volume.

Perfect. And I know you all are going to cover some of the six trades that occurred at over $40 million. So we're starting to see some larger, more significant sales as well. So we're going to first start by jumping into multifamily and then retail sales. So we'd love to hear what, what happened in each of those ass passes.

Yeah. So just to get us started in multifamily, Right. You know, following what we talked about on a macro level, we saw a 25 increase in dollar volume. Price per square foot went up closer to about 500 a foot. We're at 486. We saw about 16 sales. So that number is About a quarter of the way off of where we were in 2020, excuse me, in Q1. So these sales, what are we talking about? We're talking about a large institutional acquisition on the affordable side. Treadway bought a 60 million dollar portfolio in Fort Greene. Then we had a high net worth local investor buy a new construction building on fourth Avenue. And then we also saw some foreign appetite. Those three sales, all above the $10 million mark. When you start thinking about retail, we did also see an increase in dollar volume, about 30% sales volume, only about five sales that we saw in that asset class. Right. So price per square foot hovering around $750 a square foot. But we are seeing less sales at a higher dollar volume across the multifamily and retail spectrum.

Perfect. And then Pat, you want to talk a little bit about our industrial and development sales. And first of all, it's great to be talking about industrial in Manhattan. We don't really see those, but we know that there has been certainly a trend. So tell us what's happening in industrial.

In terms of dollar volume and number of sales? We actually did see a slight decrease. We saw about a 20% decrease on dollar volume, $65 million in sales, and then on the number of sales with only five coming in, it's about a 38% reduction in the number of sales. Many of these are user driven deals. We see this as there's an appetite to occupy your own space and we expect that trend to continue a little bit further along. Where we saw the most dramatic change and it's probably not surprising to anybody listening, is in development, we saw a 178% increase in $ volume in development sites. We saw a 300% increase in the number of sales. This is clearly an indication of comfort that was provided by the 421A extension and certainty provided by 485X facilitating ground up multifamily development. So of the 16 sales that we tracked, only four of those were slated for condominium development. So this speaks largely to the fact that people are ready to build rental again in New York City. Much needed rental in New York City and much needed rental in the boroughs. We see a lot more of that product trading going forward.

Yeah, I'm really excited to see what happens with development volume again. New York State only passed the New York housing package in April. HPD is still waiting for the application to release the application. So again, a lot of developers are already underwriting deals. We know there was 4421A deals rather that were now Grandfathered. So that's great. That'll keep a lot of that development going. So certainly more great sales to happen there. Let's also talk about conversion and redevelopment.

And then specialty sales look very similar on the conversion. Redevelopment, similar story to land deals. Right. So we saw a 134% increase in dollar volume. Three sales that we tracked. Mainly two are conversions. One is 175 Pearl street down in downtown Brooklyn in Dumbo that sold it is a office to resi conversion. It's going to utilize the new 467M tax abatement. Another conversion was 144St. Felix St. Church sold to a developer investor. So we expect more and more of this as time goes on and clearly we're headed for greener pastures in development.

Perfect. And specialty, that's always kind of the miscellaneous where we'll maybe pick up a sale or two. But in this category, five sales, $348 million. These were some pretty significant transactions. So maybe talk a little bit about some of the major deals that happened in that space.

Go ahead.

Yeah, so I think within the specialty realm, right, you're talking about hospitality sales, you're talking about self storage sales, you're talking about your charter school type conversion, that might be an existing school that's just kind of getting a new name towards the university. So within that realm, right, we saw the William Vale Hotel sale, that was $176 million sale. We also saw Carlisle go out and buy another self storage portfolio to the tune of about $110 million. Right. So these two, two acquisitions really highlight, you know, the breadth of, of the market and, and really where we can see asset classes transact in in Brooklyn.

Wonderful. And last but not least, let's talk about what happened in office.

Yeah, Patrick, look, unsurprisingly, office was a little bit quiet in the boroughs. We saw one sale, $6 million. We could talk about the Q over Q change but you know, it's is one sale, so it's not indicative of a tremendous amount. But it did go to a user. So office deal sold goes to a user. It's a story we like to see. We'd love to see more of it.

I know. And on that note, I know we're going to be coming out with an end user report. We now have our foreign investor report that we're doing twice a year. We're going to be supplementing that with the end user sale. But in Manhattan that has been a major driving trend that end users have been taking advantage of this market. Obviously you have a vacant office building, difficult to finance, difficult for an investor. But for an end user, obviously, that's a great thing where they can take occupants and really establish their presence. So Pat and Fritz, this is awesome. Really appreciate the report. Again, for those of you who are listening, if you go to avisonyoung.com tristate investmentsales.com that's where you can find all our information, our reports, any detailed information. Patton, Fritz and Joe Moran as well. Give him a big shout out. I was the no, he was combed through a lot of these sales to make this report possible. So appreciate again all your help on this report and we look forward to being in touch with you all. Thank you.