Value of development sites in Downtown Brooklyn risen sevenfold in three years! No wonder Forest City's new partner/overseer wants to build.
Development in the neighborhood is taking off, thanks in part to the Department of City Planning’s neighborhood-wide rezoning in 2004, which included both the JPMorgan Chase and Junior’s parcels. The idea was to promote denser development and “foster a multi-use urban environment,” the department said in a description of its plan. At the time the city viewed new downtown Brooklyn office towers as a way for New York to compete with cheaper office space in New Jersey.
While the Junior’s site is technically in the section proposed for commercial development, the demand for residential units downtown has skyrocketed during the latest real estate boom, pushing the price for development sites from about $50 per buildable square foot to about $350 in just the last three years, according to Mr. [Stephen] Palmese [of Massey Knakal Realty Services].
We’re very good at estimating markets, we’re very good at estimating rents, at estimating lease-ups, and estimating costs. We are terrible, and we’ve been a developer for 50 years, on these big multi-use, public private urban developments, to be able to predict when it will go from idea to reality. All we know is that if we pick the right place and we’re in with the right people, that over time we’re going to create tremendous value.Now Forest City has hit something of a cash crunch, but its new partner/overseer, the Greenland Group, is willing to build conventionally, apparently because the strong demand for housing in/near Downtown Brooklyn and its amenities.
“Y’know, these railyards have been there for a very long time,” suggested Jeffrey Kay, then director of the Mayor’s Office of Operations. “The reality is, it’s only worth what someone’s willing to provide... There is no other market.”
“I think that realizing value from railyard property that we own is something that we have learned over the last number of years, much of which has been in a boom real estate cycle, is extraordinarily difficult,” added Mark Page, then director of the city Office of Management and Budget.
The Times was editorially silent, though in a somewhat parallel situation in 1994, the newspaper repeatedly editorialized against renegotiating with a developer. “A rebounding economy will likely increase its value,” the Times opined. “It is wiser to walk away than stumble into a giveaway.”