Investors are enthusiastic about real estate in Brooklyn, particularly Crown Heights. The neighborhood’s substantial transformation, multiple transportation options and comparative affordability are among the slew of features that make the area alluring for businesses and residents alike. With quintessentially-Brooklyn architecture on many of its streets, it is no surprise that multifamily buildings and development sites are coveted.

(From left to right) Jonathan Berman, Director – Investment Sales and Remi Mandell, Analyst – Investment Research

Overall demand for multifamily properties bolstered Brooklyn’s overall investment sales market from January through September, with New York City’s biggest borough recording 806 transactions, totaling approximately $5.73 billion in gross consideration, according to Ariel Property Advisors’ Investment Research Division. While transaction volume was nearly 10% lower than the same period in 2017, a surge in big-ticket properties drove dollar volume 19% higher. Indeed, the first three quarters of 2018 saw a 32% jump in sales valued at over $20 million versus the same period a year earlier. At the same time, sales of multifamily buildings leaped 10% year-over-year to 245 properties sold.

Investors have been clamoring for assets in Crown Heights. Historically a posh neighborhood that accommodated the elite, the area has bloomed into an eclectic community as colorful as New York City itself. Spanning from Washington Avenue on the west to Ralph Avenue on the east, the region has changed enormously over the past decade, due largely to a consistent influx of new inhabitants.

Crown Heights boasts beautifully-styled buildings that serve as a stark reminder of its quaint early 20th century upper-class background. Nevertheless, while sophisticated turn-of-the-century brownstones and pre-war multifamily buildings adorn many of the tree-lined streets, a flood of modern developments are altering the area’s scenery.

A sturdy U.S. economy, namely a strong labor market and record-low unemployment, has been a boon for the multifamily property sales in Crown Heights. Despite rising interest rates, investors continue to actively seek the stable returns and capital preservation historically offered by the asset class. In Crown Heights, dollar volume was $362.80 million at the end of the third quarter, nearly double 2017’s tally. From January through September, Crown Heights saw 59 multifamily transactions, 13% more than all of 2017.

The average price per square foot for a multifamily property in Crown Heights was $369 in the year ending in September, nearly unchanged from the same period last year. However, prices remain significantly above where they were in 2013 when buildings fetched $219 per square foot, indicative of investors’ confidence in the neighborhood’s growth and stability.

Primary Destination For Developers

Developers in Brooklyn continue to purchase sites in Crown Heights, with the region registering 9 transactions totaling $79.39 million. While the average price per buildable square foot decreased 12% year-over-year to $202, prices remain sharply above 2011’s average of $72 per buildable square foot.

Meanwhile, the enactment of “Affordable New York,” the reiteration of 421-a, a popular developer tax incentive, has bolstered demand for land in the neighborhood. Indeed, developers are planning or currently embarking on large-scale projects that will add hundreds of units to the housing stock and entice new residents to Crown Heights.

Fifty-three new development projects are currently under construction consisting of 3.8 million total square feet. There will be over 3,500 residential units, 160,000 retail square feet and over 150,000 office square feet, according to data collected by Recity

Lastly, the looming shutdown of the L-Train in 2019 essentially ensures an influx of new residents to Crown Heights in the years ahead as the area has numerous transportation options. The 2,3,4, and 5 trains all pass through the neighborhood, providing easy access to both the east and west side Manhattan.

In addition, Crown Heights’ relatively lower rent should continue to lure new residents. According to an analysis by StreetEasy, the neighborhood has a median asking rent of $35 per square foot compared to $43 per square foot in equally popular Park Slope.

Looking ahead, the commercial real estate market in Crown Heights remains a beacon of opportunity. The area’s aesthetics, abundant transportation options, as well as its proximity to significant landmarks and amenities – including Prospect Park, the Brooklyn Botanical Gardens and the Brooklyn Library – should continue to entice inhabitants to the neighborhood, indicating a strong investment sales market for many years to come.