NEW YORK, NY – July 31, 2013 – Investment property transactions in Brooklyn increased 20 percent and the number of properties sold rose 17 percent in the first half of 2013 compared to the first half of 2012, according to Ariel Property Advisors’ Brooklyn 2013 Mid-Year Sales Report. Year-over-year dollar volume fell a slight 4 percent to $1.43 billion.

During the first half of 2013, Brooklyn saw 362 transactions comprised of 498 buildings, compared to 301 transactions comprised of 426 buildings with a dollar volume of $1.48 billion for the same period in 2012. The vast majority of the year-over-year increase in transaction volume came from strong multifamily sales, which saw a 21 percent increase in transactions, and a resurgence in development site sales, which experienced a 36 percent rise in transactions accompanied by a 65 percent jump in the dollar volume of those trades to $657.4 million.

“The positive changes in Brooklyn continue to attract investors, developers, and retailers from throughout the city and in some cases, the country,” said Jonathan Berman, vice president of Ariel Property Advisors. “High rents in Manhattan and a greater desire to live in the borough are pushing up rents throughout Brooklyn.”

In the first half of 2013, Bedford-Stuyvesant/Bushwick/Crown Heights captured 24 percent of the borough’s transactions, followed by Williamsburg/Greenpoint with 22 percent. Downtown/Park Slope dominated dollar volume for the first two quarters taking a 24 percent share of the $1.43 billion total.

Daniel Tropp, associate vice president of Ariel Property Advisors, noted that while rents in neighborhoods such as Williamsburg and Brooklyn Heights have stabilized some, rents in other areas such as Crown Heights, Gowanus, and Bushwick continue to increase.

“It will take several years for all of the ongoing new residential construction to be completed,” Mr. Tropp said. “Barring a macroeconomic shock, we expect rental growth to continue into the foreseeable future.”

In the first half of 2013 compared to the last half of 2012, transactions fell 2 percent, the number of properties sold increased 2 percent, and the dollar volume of those trades dropped 45 percent from $2.6 billion.

“Although the dollar volume fell in the first half of 2013 compared to the blistering second half 2012 levels, we believe this is a return to normal market behavior and expect to build on this activity over the balance of the year, ” said Mark Spinelli, vice president of Ariel Property Advisors. “The multifamily market remained robust in the first six months of the year and a lack of supply and historically low interest rates continue to drive prices up and compress capitalization rates.”

The following are highlights from the report:

• Development Sites. The borough continues to feel the positive ripple effects of the opening of the Barclay’s Arena. New proposed projects such as Two Trees planned office building for the Domino Sugar Factory site, Lightstone Group’s 700-unit rental complex along the Gowanus Canal, Brooklyn Navy Yard’s expansion, the BAM South development, and Read Property Group’s proposed 10-building residential complex in Bushwick continue to raise investor confidence in the borough’s long-term growth. One of the largest development sites to trade during first half of 2013 was an assemblage of three parcels in DUMBO, 173 and 177 Front Street and 200 Water Street. The sites combine to allow nearly 150,000 buildable square feet. The borough also witnessed the sale of 300 Livingston Street to TF Cornerstone for $70 million, which translates to roughly $140 per buildable square foot for the site’s nearly 500,000 as-of-right buildable square feet. Several sites in prime locations have seen values go higher than $200 per buildable FAR, and with rents and condo sales reaching new heights it is expected that this to become a more regular occurrence.

• Multifamily. Average pricing metrics for the entire borough show capitalization rates around 6.29 percent and the average price per square foot at $220. Prime areas, however, are seeing much more aggressive pricing. Rents are around Manhattan levels in certain areas, leading some markets to see prices above $400 per square foot. One example is 265 South 2nd Street in Williamsburg, a 24,000-square-foot property that sold for $425 per square foot. Another at 161 Columbia Heights in Brooklyn Heights traded for over $600 per square foot. Values for these sectors are significantly higher this year and it is expected that this trend will continue throughout 2013.