Sunday, November 05, 2006

Major tenants steer clear of Downtown Brooklyn office space; what of AY?

An article in the New York Observer's blog The Real Estate last week followed up on the curious phenonmenon in Downtown Brooklyn: despite a 2004 rezoning aimed primarily to promote major office development, residential projects instead have taken off.

Under the headline New Brooklyn Boss: Hits, Not Homers, Matthew Schuerman writes:
Downtown Brooklyn's lament has been the inability to attract mega-tenants to four different sites that were painstakingly drawn and measured in a city-led massive rezoning two years ago.
Joe Chan, the president of the new Downtown Brooklyn Partnership, indicated in an interview last week that he was headed in a different direction: go for singles rather than home runs. Small parcels here and there might work better for the "creative industries" that he says could make Brooklyn home.
"Those four major sites that you are referring to were assuming large buildings of 30-40,000 square feet," he said, referring to the size of the floor plates. "There are a number of other sites that were rezoned as a result of the Downtown Brooklyn Plan that may accommodate maybe 15- or 20,000 square feet.... There is a significant amount of opportunity beyond those four sites. Those four sites may change. They could be divided into two or three development parcels. The most important thing in terms of planning and economic development and real estate is creating an environment where the planners and real estate developers can be flexible."


Market conditions have changed, said Chan, who used to work for Deputy Mayor Dan Doctoroff, and the financial service firms that were being lured to Brooklyn--rather than Jersey City--for their back-office operations aren't expanding at all.

AY questions

There may indeed be a market for smaller parcels for "creative industries." But that raises questions about the Atlantic Yards plan. Remember, developer Forest City Ratner initially promised office space for 10,000 jobs. Last year, the amount of space was cut by two-thirds, and the number of jobs projected to about 2500. The explanation from FCR's Jim Stuckey: "Projects change, markets change."

So what kind of jobs and tenants does the developer expect? Phase 1 wouldn't be completed for four years, under the optimum conditions. Can anyone predict? And if the market for office space changes, so might the market for residential space, which means that Phase 2--which would contain most of the affordable housing--can't be guaranteed.

And would "creative industries" prefer to be in a couple of giant office towers or less standardized spaces either adapted from existing buildings or in smaller buildings than those planned for Atlantic Yards?

[Addendum: While it's clear that the market for office space at Atlantic Yards has shrunk, a reader informs me that the the office space projected may in fact be compatible with the same kind of uses Chan foresees for the "creative industries" in Downtown Brooklyn.]

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