Commercial Klutch: September Edition

The Manhattan office market is sinking inexorably, not like a stone but maybe like a bar of soap that don’t float…Huge amounts of institutional Class A space are coming on the market this year and next. Financial job losses are snowballing. Now, due to the lack of tightness in the market below 14th Street, tenants formerly considering leaving lower Manhattan for sunnier climes with great flea markets are being offered renewals at downtown Brooklyn prices. A 9,900-sf Montague Street deal is cratering due to this.

Luckily, much of our market caters to small tenants. Four chief sources of supply, in descending order of magnitude, reign supreme: DUMBO, the most active leasing market in the boroughs, continues actively – albeit at a slower pace than formerly; Gowanus, with several hundred tenants; Sunset Park, just starting as an office location with warehouse, small building rehab and new construction activity; and the ‘desk space movement’, more about that later.

Amy Ruth Restaurant, leased to such fanfare, has cratered. I imagine that is due to (partner) financing vaporizing. A recent attempt to open a Dumbo version of a Manhattan restaurant died due to the lovely investment environment. (If I may be permitted a land use comment Red Hook waterfront department – about BJ’s coming on the heels of IKEA. I understand the objections yet interpose the following how else will we get entry-level jobs to Red Hook but retail?)

One of the most frustrating things to my tenant rep broker friends (the folks who bring in the tenants as opposed to the specific building agents) is the rigidity of the BK landlords. Why are they like this? Some good reasons and some bad…Some owners, especially in Dumbo, have so many small spaces that constantly turn over, and so much incoming volume, that they must set up a standardized operation; pricing, terms, build out. At Court & Montague, there’s no such excuse. Flexibility is the key in the Manhattan, given the intense competition. Rapid market-responsive price and term changes (up as well as down), better build out offers and the like characterize the fast crowd over there. Here, with much less competition, limited product, a certain rigidity inhibits the free flow of transactions. Not the best thing for Brooklyn.

The happening trend right now is the creation of Brooklyn-style executive suite desk space; cubes and small private offices in shared common environments. Services include reception, office equipment, conference rooms and such. Two of the most interesting spaces are pushing the Green thang; Green Desk at 155 Water Street (interior shown under construction last May) in Dumbo and Green Space on Flatbush Avenue at Livingston. Quick Desk in Gowanus joins the group as well. Ironic, given the recent collapse of the rather run-down executive suite business in 111 Livingston Street. The spaces serve the populous ‘I just want 200 sf’ market, coming out of home offices, previous jobs and spin off businesses. Very much needed by tenants and creates an incubator environment. Hopefully tenants grow to take private offices in BK, staying loyal by not crossing the river. Prices generally range from $300 to $1,250 a month, size and privacy level depending.

Small offices are badly needed throughout Brooklyn as modern professionals spread like bacteria, as per the Q train story. Executive suite style space may be much the answer. To those guys who own vacant commercial building that can’t go residential, I quote great cop Starsky Ben Stiller version ‘jus doo it, doo it’.
Commercial Klutch: August Edition [Brownstoner]
Commercial Klutch: July Edition [Brownstoner]