A socioeconomic shift has led to Brooklyn becoming “Manhattanized,” according to a Massey Knakal third quarter recap and two reports we received in our inbox last night. This is not the first time the real estate firm has used that word, but now it goes into much more detail about it and forecasts the trend will continue.
The firm doesn’t see any slack coming at the end of the year. “We expect dollar volume in 4Q14 to exceed 3Q14,” and rents and prices to continue to increase, said one of the reports.
The reports outlined three reasons for the continued “Manhattanization” of Brooklyn:
• Big time institutional investors jumping into the market
* New, higher quality, bigger building stock
* Price appreciation in Williamsburg and other areas has closed or exceeded the Manhattan gap
Gentrification begets more gentrification:
“Sustained transformation in submarkets like Downtown Brooklyn, Park Slope, and Williamsburg has paved the way for other neighborhoods in outer submarkets to follow. As gentrification spills over to adjoining neighborhoods, it generates an increasing influx of young, well-educated and wealthy residents who are able and willing to pay elevated rents.”
Brooklyn’s cool dining and retail scene is siphoning tourists and national retailers from Manhattan:
“Once overlooked areas are blossoming into thriving retail/dining corridors causing a migration of tourist and national retailers looking to establish their footprint outside of Manhattan.” Plus businesses are increasingly looking to set up offices in Brooklyn “searching for modern, stylish, but affordable office space.”
The growth in North Brooklyn exceeds Manhattan and cap rates are luring big investors:
“In Williamsburg, Greenpoint, and Bushwick combined, the average price per square foot in first quarter 2014 was up 26 percent over 2013, compared to 12 percent in Manhattan. Additionally, average cap rates in the outer markets are 180 basis points higher than Manhattan. As such, Brooklyn and other outer markets are attractive targets for yield seeking investors.”
And it’s all here to stay:
“As investors begin chasing yield, the outer markets are perceived as having a more attractive risk-return profile than in the last cycle. The building stock and demographics have changed in a sustained ￼manner and are expected to remain.”
We moved to Brooklyn because we preferred it to Manhattan, but a developer we met the other night said most of the changes are for the better — in particular, he cited the rebirth of downtown Brooklyn.
What do you think?