NEW YORK, NY – July 26, 2023 – After a record-breaking 2022 that saw Brooklyn’s investment sales market top $9.53 billion in dollar volume for the very first time, 2023 struggled to keep pace. During the first six months of the year, Brooklyn saw 457 transactions totaling $2.92 billion dollars, which represents 16% and 26% decreases respectively compared to 2H 2022 and declines of 31% in transactions and 47% in dollar volume compared to 1H 2022, according to Ariel Property Advisors’ Brooklyn 2023 Mid-Year Commercial Real Estate Trends report.

“The multifamily market in Brooklyn slowed considerably in the first half of 2023 following an incredible post-Covid boom that began during 2H 2021 and continued through 2022,” said Ariel Partner Sean Kelly, Esq. “We did see, however, that affordable multifamily gained notable interest from investors, which resulted in affordable housing accounting for approximately 30% of the multifamily dollar volume for the borough in the first six months of the year, the third highest percentage for a half-year in affordable housing since 2010.”

In the development market, Director Stephen Vorvolakos observed, “Despite the expiration of 421a/Affordable New York tax abatement in June 2022 and increased construction costs, Brooklyn’s development market received a boost in investment through several large acquisitions. Most notable was the concentration of development site sales. Of the total trades recorded in 1H 2023, 53% of the transactions took place in Greater Downtown Brooklyn, Park Slope, and Gowanus.”

Highlights from the report by asset class include:

Multifamily.

      • Multifamily dollar volume totaled $1.31 billion in 1H 2023, a 44% decline compared to 2H 2022 and a 51% drop compared to 1H 2022, while transactions totaled 264 in the first six months of 2023, down 26% half-over-half and 39% year-over-year.

      • Institutional buyers slowed their activity in the first half of 2023. While 1H 2022 saw five transactions north of $100 million, 1H 2023 only had two, one of which was the Arker Companies’ $150 million sale of the 816-unit Sea Park affordable housing portfolio in Coney Island to a JV led by Tredway, a deal arranged by Ariel Property Advisors.

      • Despite lower transaction and dollar volume in the multifamily sector, the rental market remained red-hot, reaching all-time records.

Development.

      • Development transaction and dollar volume in 1H 2023 increased by 5% to 78 and 12% to $811 million compared to 2H 2022.

      • Institutional capital continued to bet on the Brooklyn market, acquiring assets for both condo and rental development. Seven of the 78 transactions borough-wide accounted for $475 million of the total dollar volume in the first half of the year.

      • The sale of the St. Francis College campus to Rockrose Development Corporation for $160 million, or $321/BSF, was the largest development transaction in 1H 2023.

Commercial.

      • Commercial dollar volume doubled from 1H 2022 to $395 million in 1H 2023, thanks in large part to institutional capital reentering the space after a quiet three years post-Covid. Transaction volume declined 2% to 42 during this period.

      • Significant trades included the purchase by London-based hospitality group Quadrum Global of the Williamsburg Hotel at 96 Wythe Avenue for $96 million, and EPR Properties’ purchase of a commercial space at 221 N 14th Street for $43.3 million.

      • The average price per square foot for commercial space in 1H 2023 was $662/SF, slightly lower than the record-breaking average $666/SF recorded in 2022.

Industrial/Warehouse/Self Storage

      • Industrial, warehouse and storage transactions rose 4% to 49 in 1H 2023 compared to the previous six months and were flat year-over-year. Dollar volume totaled $235 million, a decline of 29 percent from 2H 2022 and a drop of 74% from 1H 2022.

      • After several years with either Red Hook or Sunset Park leading the way in terms of transaction volume, East Flatbush stepped to the front during 1H 2023, with eight transactions totaling $42.6 million.

To read Ariel Property Advisors’ Brooklyn 2023 Mid-Year Commercial Real Estate Trends report, please click here.