Commercial real estate transactions in Brooklyn dropped to $2.7 billion in the first six months of the year, a roughly $1.3 billion drop from the first half of 2018 that was driven by a plunge in trades ahead of June’s rent-stabilization laws, according to an analysis from Brooklyn-based brokerage firm TerraCRG.
Transactions in 1H19 were spread across 495 deals, down from 597 deals totaling $4 billion in 1H18, according to the firm. The decline was centered on a drop in trades of multifamily and mixed-use assets in anticipation of the changes to the city’s rent laws.
“The majority of the multifamily transactions in Brooklyn are rent-stabilized,” Ofer Cohen, founder and President of TerraCRG, said to Commercial Observer. “Investors, anticipating the law changing without knowing what the result of the vote would be, did not want to make that much of a commitment to that asset.”
Multifamily trades across the borough fell to $771 million on 115 deals in 1H19, down 55 percent from $1.7 billion on 152 deals in 1H18. “In the second half of 2019, the volume of multifamily transactions is going to continue to decline even further, maybe even come to a halt,” he said.
Mixed-use trades fell to $511 million on 173 deals in 1H19, down 19 percent from $627 million on 203 deals in 1H18.
The pain was felt most acutely in East Brooklyn, including Brownsville, Canarsie and Cypress Hills, which saw a staggering 91 percent drop-off in total activity; the area’s trades fell to $87 million in 1H19 from about $1 billion in 1H18. In the multifamily sector, the area’s activity fell to about $10 million across nine trades in 1H19, down from $889 million on nine trades in the prior year period.
The Greater Downtown area, which stretches from Dumbo down to Red Hook, also saw a drop in activity, falling 35 percent to $581 million in 1H19. On the flip side, West Brooklyn, which includes Bay Ridge, Sunset Park and Windsor Terrace, saw a 34 percent uptick to $409 million.
The industrial and office sector was a bright spot, with trades increasing by 30 percent to $593 million on 28 trades in 1H19, up from $456 million on 33 deals in the prior year period.
“Short of the mess that we have of the multifamily market … the market is operating pretty smoothly,” Cohen said. “It’s a continuation of the market that we’ve seen in 2018.”
The North Brooklyn district, composed of Williamsburg, East Williamsburg and Greenpoint, was the most active, with $606 million of deals. The Greater Downtown market was, for the third time in a row, the busiest for development with $146 million of those deals landing on the books.