Brooklyn’s Historically High Leasing Year
Nearly 1.4 million square feet of leasing happened in Kings County in 2017
The Brooklyn office leasing market recorded a strong year in 2017. As the overall vacancy rate dropped year-over-year, historical high leasing activity occurred in Brooklyn and pricing increased in select areas of the market. In addition, there is currently 3.2 million square feet under construction with 1.8 million square feet set to be delivered this year. The presence of creative tenants, such as TAMI (technology, advertising, media and information services) and arts and entertainment tenants, continues to grow within this market, accounting for 31.4 percent of the square footage leased from 2015 through 2017.
The Brooklyn overall vacancy rate dropped 90 basis points in 2017 and ended the year at 10.5 percent. Despite 1.8 million square feet of new construction completions last year, the vacant supply declined as demand for space was robust. The coastal Brooklyn submarket had the largest drop in vacancy, down 390 basis points in 2017 to 12.1 percent. Downtown Brooklyn vacancy remains the lowest of the three major markets, but at 6.6 percent, the rate increased 50 basis points in 2017.
Nearly 1.4 million square feet of new leasing activity occurred throughout Brooklyn in 2017, the highest level in over 15 years. Brooklyn leasing flourished from large deals, as six new leases signed were 50,000 square feet and greater. New leases dominated the activity and accounted for nine of the 10 largest transactions signed last year. Coastal Brooklyn led the way with 786,779 square feet leased, followed by Downtown Brooklyn with 417,027 square feet of new leases.
Brooklyn Class A average asking rents were flat year-over-year with a slight 0.2 percent dip in 2017 to $51.26 per square foot. Downtown Brooklyn Class A asking rents increased significantly in 2017, up 17 percent to $51.71 per square foot. Coastal Brooklyn Class A asking rents dropped significantly year-over-year, down 26 percent to $52.23 per square foot, due to below-average priced flex space that hit the market.
Counter to any doubt that Brooklyn was a one-hit wonder in 2017, this year is already off to a hot start. The 231,270 square feet leased in January equaled 75.7 percent of the total during the fourth quarter of 2017.