Exclusive: Retail in Brooklyn Shows No Signs of Slowing Down
By Ryan Condren, CPEX Real Estate
We are in the midst of a retail boom in Brooklyn and it is only going to get bigger. Over the past two years, retail has grown significantly in Brooklyn, the fourth largest “city” in the U.S., with the number of corridors (streets with a notable retail presence and average rents of at least $35 per square foot) nearly doubling since 2013. According to CPEX’s 2015 Brooklyn Retail Report, the number of active retail corridors grew from 67 in 2013 to 121 in 2015, an increase of over 80%.
This massive growth is being driven predominantly by a number of non-retail factors, including an increase in new residential developments, the rising number of office tenants, and a growing hospitality industry within Brooklyn. Since 2013, the number of new permits for residential developments in Brooklyn is up 116%, and 149% more than all other NYC outer boroughs combined. The office vacancy rate is down to 4.2% - the lowest in the U.S. - and the hospitality industry continues to grow, with 50 existing hotels and 21 more in the pipeline by 2017. Primed for even more growth in the coming years, this all adds up to a greater demand for amenities and services. As a result, retail rental rates will continue to soar – last year marked the first time a Brooklyn corridor surpassed an average of $200 per square foot – and more retailers will continue to arrive in waves.
2014 in particular was a major year for retail in Brooklyn, as more retailers, both national and local, set up shop in the borough for the first time. National retailers J.C. Penney, Apple and Neiman Marcus announced their first stores in Brooklyn in 2014, and 2015 is already off to a fast start with Bed Bath & Beyond signing a 100,000-sq.-ft. lease at Liberty View Industrial Plaza in Brooklyn’s Sunset Park neighborhood. This will be the first time that Bed Bath & Beyond will open a location together with three of its other shops - buybuy Baby, Cost Plus World Market, and Harmon Face Values - as part of one store experience.
Retail activity, such as the Bed Bath & Beyond lease, is a game-changer for Brooklyn neighborhoods like Sunset Park, whose commercial space was once dominated by industrial properties and thought to be untouchable by retailers. The opening of neighborhoods to retail via the transformation of industrial properties is a trend that is poised to continue and create further opportunities for retailers in 2015 and beyond.
Despite the overall retail growth, the majority of retail activity continues to take place in Northern Brooklyn (north of Prospect Park), while Southern Brooklyn hasn’t seen as much retail growth. This is a natural result of Northern Brooklyn’s proximity to Manhattan and the influx of housing and residents into the area. The trickle-down effect will take some time to reach farther into Brooklyn, but rest assured it will soon enough.
A few Northern Brooklyn neighborhoods in particular have become real hotbeds for retail; for example, the neighborhood of Bedford Stuyvesant has seen a massive rise in retail activity driven by an influx of new residents. In 2014 alone, 33 news retail locations opened in the neighborhood. In addition to Bedford Stuyvesant, the neighborhoods of Park Slope, Williamsburg, and Crown Heights have all become top destinations for retailers, today boasting the three highest retail corridor densities in the borough with a total of 35 corridors between them.
Many corridors saw significant growth in retail activity in 2014. Some of the most notable corridors include 86th Street, Union Street, and North 4th Street:
• 86th Street (4th Ave – Fort Hamilton Parkway): Historically one of the top retail locales in Brooklyn, the corridor has recently added top retailers, including Chipotle, Victoria’s Secret, and Panera Bread.
• North 4th Street (Kent Avenue – Bedford Avenue): Two years ago, North 4th Street wasn’t a corridor; today, retailers including Whole Foods, New York Sports Club, and Steven Alan Home, have all taken up space in and around this former “side street.”
• Union Street (Nevins Street – 4th Avenue): This corridor is home to several noteworthy retailers, including Dinosaur BBQ, The Royal Palms Shuffleboard Club, and Ample Hills Creamery. This stretch of Union Street benefits from being nestled between Park Slope and Carroll Gardens.
If these corridors and 2014 as a whole are any indication, retail in Brooklyn will only continue to grow both in terms of price and prevalence. As more residents, business, tourists, and developers flock to the borough, retailers will follow suit and keep retail booming in Brooklyn.
Ryan Condren is Managing Director of Retail Leasing for CPEX Real Estate. A retail property specialist, Ryan helps landlords and property owners obtain commercial tenants for their retail properties throughout New York City. Ryan has completed over 100 retail lease transactions totaling more than 450,000 square feet of retail space with an aggregate lease value of over $425 million.