Skip to main content

Featured Post

Atlantic Yards/Pacific Park graphic: what's built/what's coming + FAQ (pinned post)

Whither commercial real estate? Brookfield says tenants are paying; brokers say Brooklyn may beckon

Well, there may be a market for Brooklyn office space, but not--I'd still contend--a ground-up office building at Site 5 of Atlantic Yards/Pacific Park, not at least until there's a vaccine.

Brian Kingston, CEO of Brookfield Property Partners, in a 6/18/20 interview with The Real Deal, was asked if they were having trouble collecting rent from non-retail tenants:
No. A lot of the other public office and multifamily companies have reported their rent collections are at normal levels, and that’s consistent with ours as well. Our office collections are exactly the same as last year, and multifamily is actually slightly higher than it was in 2019, so there are no issues there.
That suggests that the company's MetroTech complex, built by and bought from Forest City Ratner/Forest City Retail Trust, is doing fine. That's plausible, given that larger tenants are financial or governmental entities, but there are also numerous smaller tenants, some of which may be struggling.

Kingston perhaps has to sound bullish, but he professed not to be worried about a lowered demand for office space going forward:
But the idea of working from home full-time does not seem to have much appeal. I think we’ll see certain changes in the way that companies utilize their offices, but we don’t see this as an existential threat.
Those changes presumably include not just reconfiguration to add plexiglass, but also less time in the office. If so, then companies may not need as much space.

A move to Brooklyn?

In a 6/17/20 article headlined Brooklyn Bound: Companies Eye Brooklyn Offices Post-Coronavirus, the Commercial Observer reported that some companies with Manhattan office space are considering satellite or replacement offices in Brooklyn, closer to their employees, making the commute easier.

Two new office buildings are about to open, JEMB Realty’s One Willoughby Square in Downtown Brooklyn and Two Trees Management’s 10 Grand Street in Williamsburg, and there's still space in DUMBO.

The article cites 2.31 million square feet of new construction or redevelopment projects, plus 635,000 square feet undergoing major renovations. Two major buildings, 25 Kent in Williamsburg and Dock 72 in the Brooklyn Navy Yard, seem to be still largely unrented. And there's space in Industry City.

What about Hudson Yards?

How Will Hudson Yards Survive the Pandemic?, the New York Times published 6/19/20 (and in the 6/21/20 Real Estate section), suggesting that "the largest mixed-use private development in American history" was likely too big to fail, "even if Neiman Marcus and other retailers go under, and condo sales for the unbuilt towers over the unbuilt platform stagnate."

“Hudson Yards has inherent advantages because it was conceived as an integrated, sustainable, state-of-the-art live-work-play environment where people can get everything they want and need right in their own neighborhood,” Stephen M. Ross, chairman of the Related Companies, said in a statement. “The benefits of this kind of future forward thinking are more apparent and relevant than ever right now.”

Maybe not right now, but maybe if the pandemic is conquered. It will have 18 million square feet of commercial and residential space over 26 acres, while Atlantic Yards would be 8 million square feet over 22 acres (though that includes the arena).

Still, the article warns of potential property tax delinquencies and the need for bond payments.