Office space glut in Brooklyn likely casts further clouds on plans for office project at Site 5

How Brooklyn’s Office Market Is Getting Through COVID, the Commercial Observer reported 2/23/21, quoting broker Chris Havens of TerraCRG that, even though it was a tenant's market before the pandemic, now it's even more so: "There’s really nothing large happening.”

So prices for office/industrial properties are going down, to $327 per square foot at the end of 2020 from $467 psf a year earlier, and rents to $39.03 a square foot from $40.37, with an availability rate in 2020 to 18.3% (Colliers Intl.) to 22.4% (CBRE).

The article notes several major projects haven't panned out, including the former Jehovah’s Witnesses headquarters in Fulton Ferry, now called Panorama; Dock 72 at the Brooklyn Navy Yard; The Refinery at the Domino Sugar site in Williamsburg; and 25 Kent Avenue in Williamsburg. 

(The Refinery strikes me as the most attractive property, given its placement near open space, but maybe people would rather work from their apartments.)

Meanwhile, some 4 million square feet of new construction or major renovation is on deck for the next four years, more than doubling the amount that arrived in the past two years. And the large anchor tenants once sought may have to be replaced by smaller tenants, given the competition from Manhattan.

That said, interviewees suggested that Brooklyn office space, closer to many residences, may be attractive to certain companies, and also that more out-of-the box leasing, such as the Whittle School in Downtown Brooklyn, could happen.

What about Site 5?

Bottom line for Atlantic Yards/Pacific Park: though Site 5, still waiting for a proposed transfer of bulk from the unbuilt "Miss Brooklyn" tower planned for what's now the arena plaza, might be more attractive than some other locations in Brooklyn for office space, it's can't be a priority for the developer.

So the wariness toward office work, coupled with the glut of existing office space, casts further clouds on plans for the parcel long occupied by Modell's (now closed) and P.C. Richard.

Given that the bulk tranfser would be a year-long public process, and construction of two giant towers would take several years, the builders need to believe there's a light at the end of the tunnel--and to raise the money either for a speculative tower or to snag an anchor tenant.

But that light isn't there yet. 

Nor is there yet an argument for housing at the site, though it's possible the housing market will turn before the office market does. Hmm, could Site 5 become a work-from-home special tower?