Brooklyn Office Market Mostly Strong; Iffy on High End

There’s been a healthy appetite for Brooklyn office space so far this year, according to a new report from Marcus & Millichap, and demand for commercial properties may soon become voracious. Or not; it’s hard to say. The brokerage found that while office vacancy remains static—it’s likely to close out ’07 at around 10.3 percent, about the same level as ’06—average rents were up 8.4 percent in the second quarter, to $25.98 a square foot. At the same time, however, average Class A rents posted a year-over-year decline of approximately 8.4 percent (to $31 a square foot), and the whopping 350,000 square feet of Class A space that came online last year when JP Morgan Chase and Empire Blue Cross moved their back-end offices out of Metrotech has yet to be filled. The bigger picture, therefore, is that demand for Class B and C space is driving Brooklyn’s commercial market, while landlords for top-of-the-line properties are having a tougher time finding companies to willing to sign on the dotted line. (This goes a long way in explaining why developers have been reluctant to build new office buildings in Downtown Brooklyn, opting instead for residential.) The report notes that whoever fills the Metrotech vacancies is likely to be a bellwether for the rest of Brooklyn’s commercial market. So we’ll just have to wait and see.