With new Brooklyn office buildings struggling to fill space (even with "HUGS"), that again suggests Site 5 project would be residential, not office.

Hey, remember when, eight years ago, a representative of joint venture Greenland Forest City Partners, justifying plans to move the bulk of the unbuilt "Miss Brooklyn" tower, once slated to loom over the arena, across Flatbush Avenue to create a giant two-tower project at Site 5, stated, "We think the time is right for the borough to have an iconic office building."

Well, as one of the Atlantic Yards mantras goes, "Projects change, markets change." (Thanks, Jim Stuckey.)

Given the pandemic and the shift to remote work, office space is less desirable, hence articles like
Office Building Losses Start to Pile Up, and More Pain Is Expected, from the New York Times.

And the market for office space, especially in Brooklyn, seems to be receding. 

That means, at least in the near term, that the still-pending project at Site 5, which requires governmental action to unlock the new development rights, is far more likely to contain residential space than office space.

Site 5 is the parcel long home to P.C. Richard and the now-closed Modell's, approved for a 250-foot, 439,050-square-foot building. But the developer in 2015-16 began advocating for a much larger plan.

The recent downturn

A June 3 article from the Real Deal, Brooklyn’s new ultra-luxury offices struggle to land leases, cites struggles to fill new "Class A towers with big floor plates and top-of-the-line amenities," which were built on spec, without anchor tenants.

While some are far from public transit, like the Refinery at Domino in Williamsburg and Dock 72 at the Brooklyn Navy Yard, others, like 141 Willoughby Street and One Willoughby Square, are in Downtown Brooklyn near multiple transit options. 

(Unmentioned is another struggling building, 25 Kent Avenue in Williamsburg, which is somewhat closer to transit, but not that close. It's tried to slash rents to attract tenants.)

Instead of signing large leases--say, 30,000-plus square feet--with deep-pocketed tech companies seeking flagship locations, the landlords are now trying to rent smaller spaces to less established firms.

The Real Deal reports that the value of office space has dropped dramatically, from $445 per square foot in 2019 to $235 today, citing brokerage TerraCRG.

New focus

There's even a new acronym. Remember FIRE (finance, insurance, and real estate) and "eds and meds" (educational institutions and health care facilities)? They've long been joined by TAMI (technology, advertising, media and information).

These days larger leases, 15,000-plus square feet, come from health care, university, government and social services, known as HUGS. So that's an update on "eds and meds," with the implication that government and social service tenants, however reliable, don't have deep pockets.

From the Real Deal:

It takes a lot of small leases, or a lot of patience, to rent 100,000 square feet of Class A, but landlords who can hold on long enough — either through workouts with lenders or by dipping into deep pockets — remain optimistic that a turnaround will come.

From office to residential

One older, loft-style office building, not well located, is no longer waiting for tenants but being converted to apartments.

The Commercial Observer May 30 reported, in BridgeCity Lends $51M on Brooklyn Office-to-Resi Conversion, that "175 Pearl Street, an eight-story building in Brooklyn’s Dumbo neighborhood" was being turned into apartments, with remaining tenants already gone or planning to leave.

“The site is ripe for conversion with beautiful open floor plates and substantial light and air from three sides of the building,” Jacob Friedman, chief financial officer of BridgeCity, told the publication, aiming for a 14-story, 238-unit residential building. That implies a vertical addition.

Note that, while the location may be technically DUMBO, and is relatively close to the F train, it's on the south side of the Brooklyn-Queens Expressway and requires crossing wide, busy Sands Street.

It surely was not considered by potential office tenants to have easy access to, for example, Brooklyn Bridge Park, which is a lure to potential DUMBO residents or tenants.