Skip to main content

City leverage brings office space and lower land price for Downtown Brooklyn tower; will government steer AY towers to office?

Not much of a contextual perspective,
420 Albee Square via architects KPF
Some eleven years after Downtown Brooklyn was rezoned to spur office development--but instead spawned luxury housing and hotels--the first new ground-up commercial office building is coming, thanks to city leverage.

A 400,000 square foot office (plus retail) building will be at 420 Albee Square, on a parking lot just west of the City Point project and between Fulton and Willoughby streets (The tower, which has been cut from previous iterations, is described as 38 to 40 stories, which sounds like 400 feet, and by some as 600 feet, which doesn't make sense.)

Because the city could sell nearly one-third of the development rights, it could mandate that the building have office space. So the $15.5 million sale of 120,000 square feet of development rights and 3,000 feet of land comes out to $125 per buildable square foot, according to YIMBY and Politico.

That was, according to the city, "market-rate," apparently because the developer, JEMB Realty, responded to an RFP.

Then again, JEMB already bought the rest of the site, paying $205 per square feet in April 2014, the Real Deal reported, with the initial plans for residential.

And the RFP seemed to give JEMB a leg up, given that it stated, "A Respondent that is not in possession of a site on which to transfer the Floor Area Development Rights at the time of RFP submission may still submit a Proposal for the Transaction."

The market, and AY

Given that the market for residential property nearby is now more than $250 per square foot, as shown in a Forest City Ratner transaction announced last week regarding 625 Fulton Street, the decision to assign 420 Albee Square to office space surely capped the sales price.

This understandable effort by the city to try to develop needed office space--it could try other tactics to limit residential, couldn't it?--suggests implications for Atlantic Yards/Pacific Park.

If office space is so much less valuable than residential space, should we really expect the two sites that could accommodate office (and retail)--the B1 site over the arena plaza, and Site 5 across the street--to not go residential?

Perhaps Greenland Forest City Partners will say only city and state support or subsidies can guarantee that needed office building.

Indeed, note that the B1 site and Site 5 (at the bottom right of the graphic below) are clearly marked as within the Brooklyn Tech Triangle, said to encompass Downtown Brooklyn, the Brooklyn Navy Yard, and DUMBO.

From Brooklyn Tech Triangle report

The Brooklyn Tech Triangle Coalition, which is advocating for the creation of more office space, is comprised of the Downtown Brooklyn Partnership (which is co-led by Forest City Ratner's CEO MaryAnne Gilmartin), Brooklyn Navy Yard Development Corporation, and DUMBO Improvement District.

There's a new office building being built in the Navy Yard, and major buildings in the Navy Yard, DUMBO, and Downtown Brooklyn are being converted to office space, according to the coalition.

The supertall proposal
And then there's new residential space, such as the proposed--as YIMBY reported--supertall tower, Brooklyn's biggest building, at 1000 feet, behind the Dime Savings Bank and Junior's at 340 Flatbush Avenue.

Indeed, the new supertall and other Downtown Brooklyn development could be used to argue for new, greater height limits on the two Atlantic Yards/Pacific Park towers closest to downtown: the 250-foot tower at Site 5, and the 511-foot B1.

From the press release

The press release on the office building yesterday from the New York City Economic Development Corporation was headlined Deputy Mayor Glen, NYCEDC, JEMB Realty, Downtown Brooklyn Partnership and Local Leaders Announce Brand New 400,000 Square Foot Commercial Building in Brooklyn's Tech Triangle, followed by:
First Ground-Up Commercial Development in Downtown Brooklyn Since 2004 Re-Zoning
Announcement Follows NYCEDC President Maria Torres-Springer’s Speech Identifying Need for 60 Million Square Feet of Commercial Office Space by 2025; Brooklyn Tech Triangle Coalition Report Calling for Additional Commercial Space in Brooklyn’s Tech Triangle
Deputy Mayor for Housing and Economic Development Alicia Glen, New York City Economic Development Corporation (NYCEDC) and JEMB Realty today announced a brand new commercial development that will bring 400,000 square feet of new office and retail space to 420 Albee Square in Brooklyn’s Tech Triangle. This project, the first ground-up construction of commercial space since the re-zoning of the area in 2004, builds off the de Blasio administration’s commitment to supporting growth and creating jobs in emerging innovation and commercial centers across New York City. The project is also the latest part of the Downtown Brooklyn Redevelopment Plan, a City strategy to revitalize this area, under which the City has made $300 million in public investments in open space and infrastructure commitments. 420 Albee Square will provide much needed space for innovative and technology focused businesses in rapidly expanding sectors of the economy while helping to further advance the growth of Brooklyn’s Tech Triangle. The project is expected to create approximately 722 permanent jobs and 566 new construction jobs, and by adding at least 400,000 square feet of space, this development will help address the need for additional office space in New York City. NYCEDC projects that 60 million square feet of new commercial office space will be needed across the city by 2025, much of it in outer borough commercial hubs like Downtown Brooklyn.

Today’s announcement accompanies the release of a Tech Triangle Economic Impact report by the Brooklyn Tech Triangle Coalition, a group comprised of the Downtown Brooklyn Partnership, Brooklyn Navy Yard and DUMBO Improvement District. The report calls for the creation of 3.1 million square feet of office space to meet the needs of the rapidly expanding workforce and business community located in the Tech Triangle. The Coalition projects that the Tech Triangle could generate $15.5 billion in economic impact by 2025, and the report highlights the need to support the future growth of the area by making four recommendations to ensure that the it remains a world-class center for innovation. These recommendations – creating commercial and industrial working space, leveraging City assets to support commercial growth, investing in public spaces, and enhancing transit infrastructure – will help support the growing creative and tech ecosystem, which the Coalition expects to grow by 18,000 jobs in the next 10 years. The Brooklyn Tech Triangle Coalition consists of the Downtown Brooklyn Partnership, DUMBO Improvement District, and the Brooklyn Navy Yard Development Corporation.
“We want to make sure that companies keep starting-up, innovating and growing in the Tech Triangle. And the City can spur that growth by making sure innovators have the office space they need,” said Deputy Mayor for Housing and Economic Development Alicia Glen. “This is a fantastic project that will stoke Brooklyn’s economic engine and deliver the kind of high quality jobs and careers we want to secure our place in the 21st Century economy.”

"Brooklyn's Tech Triangle has seen incredible growth over the last decade, and with this new development, the City continues to invest in the neighborhood's future and position the area as a center for innovation and job creation," said NYCEDC President Maria Torres-Springer. "In our efforts to support entrepreneurs and encourage economic opportunity and job creation, we are finding ways to utilize City-owned assets by leveraging the power of public-private partnerships, capitalizing upon every opportunity to create the space innovative businesses need to thrive, expand and create the jobs of today and tomorrow."
“Today’s announcement delivers exactly what Downtown Brooklyn needs: critically needed space for jobs to support Brooklyn's economy and a commitment to infrastructure like open space to support that growth,” said Downtown Brooklyn Partnership President Tucker Reed. “In 2004, Downtown Brooklyn was rezoned with a primary aim of creating new office space, but since then we’ve experienced a residential boom instead. It’s time for our commercial inventory to catch up, and today we can see how leveraging government owned assets to help the marketplace achieve public goals helps get us there. That’s smart economic development policy.”
(Emphasis added)

Note that "leveraging government owned assets" means having the government decide to sell property at a lower price.

Or the city could just create value by expanding the rezoning. The Tech Triangle advocates:
Specifically, the City should consider revisiting land use policy within the Brooklyn Tech Triangle to incentivize the creation of new commercial office space. The Special Downtown Brooklyn District could be expanded to include areas closer to DUMBO and the Brooklyn Navy Yard and in the process increase density for those projects that include commercial office space.
Basically, the message is to expand the previous rezoning and do it "right," this time allowing greater density for only projects including office space, rather than standalone residential buildings. That proposal is a windfall for property owners, of course.

But couldn't the 2004 Downtown Brooklyn rezoning be revised?

Some coverage

Some history from YIMBY, in Downtown Brooklyn Is Finally Getting A New Office Building At 420 Albee Square:
Plans for 420 Albee Square were first filed over a year ago. They initially called for a 65-story tower with 650 apartments and over 270,000 square feet of commercial space on the lower floors. Anotherround of applications scaled the building down to 35 stories in March, and those plans detailed a 232,000-square-foot project with 248 apartments and 36,500 square feet of commercial space on the first four stories.
...The development rights and the property came from Willoughby Square, a public plaza planned on top of an underground parking garage on Willoughby Street between Gold and Duffield Streets. The city sold the air rights for the one-acre green space, but it still plans to build the plaza.
Politico's coverage included a Forest City Ratner salute from the Borough President:

During a press conference that echoed with trendy terms like “innovation economy,” “makers,” and “Brooklyn tech triangle,” politicians paid tribute to Brooklyn’s cache as New York City’s most fashionable borough and the people they believe made it so.
"We are who we are because we had visionaries like [Atlantic Yards developer] Bruce Ratner,” said Borough President Eric Adams, who called Brooklyn a “center of the universe.”
The building-to-be has no office tenants lined up, but it’s close to several subway lines, across the street from City Point, down the street from Fulton Mall, adjacent to what will be a new park and in the midst of what Brooklyn boosters routinely describe as a booming office market in dire need of more space.
“Office vacancy rates in this area are now at around three percent, essentially, functional zero,” said Alicia Glen, the deputy mayor for housing and economic development. "And that shortage will definitely impede the incredible momentum that we’ve seen going on around here."
Other incentives

Politico noted that city officials declined to identify “as of right” city incentives.

The Downtown Brooklyn Partnership has saluted the city's Industrial and Commercial Abatement Program (ICAP), the Commercial Expansion Program (CEP), the Relocation and Employment Assistance Program (REAP) and a variety of energy programs, including the Energy Cost Savings Program (ECSP), but says they must be made permanent, rather than continue on short-term extensions.

Comments

Popular posts from this blog

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…

Former ESDC CEO Lago returns to NYC to head City Planning Commission

Carl Weisbrod, Mayor Bill de Blasio's City Planning Commission Chairman and Director of the Department of City Planning, is resigning,

And he's being replaced by Marisa Lago, currently a federal official, but who Atlantic Yards-ologists remember as the short-term Empire State Development Corporation CEO who, in an impolitic but candid 2009 statement, acknowledged that the project would take "decades."

Still, Lago not long after that played the good soldier at a May 2009 Senate oversight hearing, justifying changes in the project but claiming the public benefits remained the same.

By returning to City Planning, Lago will join former ESDC General Counsel Anita Laremont, who after retiring from the state (and taking a pension) got the job with the city.

Back at planning

Lago, a lawyer, in 1983 began work as an aide to City Planning Chairman Herb Sturz, and later served as the General Counsel to the president of the NYC Economic Development Corporation, Weisbrod himself.