With fluctuating market for office space, Site 5 prospects remain fuzzy

Anyone looking at the recent history of prognostications regarding Downtown Brooklyn and/or Atlantic Yards must have some humility. Remember, Downtown Brooklyn was rezoned to enable more office space, but instead residential construction boomed.

Atlantic Yards was supposed to take ten years to build when it was approved in 2006; now construction should stretch well past 2025.

In other words, as former Forest City Ratner executive Jim Stuckey once famously said, "Projects change, markets change."

So it's worth taking prognostications about office space in Brooklyn--and, with that, the chances for a massive new office tower project at Site 5--with a grain of salt.

When Forest City in February 2016 floated a plan "to build Brooklyn's largest office tower across from Barclays Center," Tucker Reed, president of the Downtown Brooklyn Partnership, told Crain's, "Our office vacancy rate in downtown Brooklyn has fallen to a historic low of 1.6%. We risk losing significant investment and further job growth in downtown Brooklyn if additional inventory does not come online in the immediate future."

The project has not moved forward in the public approval process, however, given an unresolved lawsuit. Even if it were approved in the next year, it would take a couple of years to build. It's tough to predict the market.

A slowdown?

By July of last year, however, Bloomberg's David M. Levitt reported Brooklyn Office Developers Chasing Tech Tenants Face a Slowdown:

Demand is cooling as development across the East River surges, with 9.6 million square feet of Brooklyn offices slated for completion by the end of 2020. Developers and investors behind projects including the former Domino Sugar plant, the Watchtower building and the retired Schlitz Brewery are aiming to draw TAMI [tech, advertising, media and information] tenants, and Brooklyn’s emergence as one of the U.S.’s top tech centers is threatened unless there’s a reversal of the slowdown.

In Brooklyn at large--not Downtown Brooklyn--there was a 14.5% vacancy rate. Richard Persichetti, Cushman’s research director for the Northeast, told Bloomberg there was still demand, but "There is no way to tell which projects will be built.”

Reed suggested that the new residential population would drive further office interest.

Now, a potential glut?

Last week, Bloomberg's Levitt reported Brooklyn’s Office Boom Isn’t Drawing Big Manhattan Tenants:

A push to attract big-name companies for large offices in Brooklyn has so far come up short. Not one non-government employer has signed a lease for more than 100,000 square feet (9,300 square meters), a typical minimum size for a building’s anchor tenant, since mid-2015. Last year, the only deal that large was a renewal by the New York City Fire Department.
With about 7 million square feet of offices planned -- more than twice the space at the Empire State Building -- luring major tenants is critical to developers who see the borough as the next frontier for companies seeking state-of-the-art spaces and a more affordable alternative to Manhattan. 

That's not to say that a project like that floated for Site 5, at a very prominent crossroads, couldn't lure a tenant with deep pockets aiming to pay more for a high-profile site. But it's not a solid bet as of now. Stay tuned.

And Brooklyn Chamber of Commerce CEO Andrew Hoan, whose focus is understandably more broad than that of the head of the Downtown Brooklyn Partnership, seems unperturbed. “Having a 100,000-square-foot corporate tenant announce a move to Brooklyn would be phenomenal,” he told Bloomberg. “Does the success of Brooklyn depend on it? Not necessarily."