Commercial Klutch: Tenants Face Atypical Space Crunch

Our masked and anonymous soldier in the Brooklyn commercial real estate trenches files this month’s report on what he/she is seeing in the field. The latest column is particularly timely given yesterday’s Crain’s article about Dumbo’s continued status as a “tech hotbed.”

Is the unthinkable happening? Are tenants moving to or returning to the small island across the east river, leaving our big island behind, as commercial space in Dumbo becomes nearly impossible to find?

Tenants seeking space from 500 to 1500 RSF are the bulk of the booming demand around here. Most can’t find decent space this spring. The main “supplier,” Two Trees in Dumbo, is supply short and using most ‘smalls’ for their own internal demand. Even Court Street, historically slow moving, saw 32 Court lease three 900 RSF spaces within a few weeks this year.

Reflecting the rapid decline retail and apartment inventory, commercial offices had been plentiful until last year’s steady draw down. While there is usually something out there, and owners building out new footage as fast as they can, at any given moment the game of musical chairs finds tenants competing for limited seating, festival style. Gowanus, Fourth Avenue and even Sunset are bubbling, with few options even in these edge markets.

One wrinkle – generally creatives decline DTB space.They prefer to herd. That may slowly change as other options sell-out and DTB evolves further.

The new 1000 Dean Street should help out in 2013, drawing from new businesses in Prospect Heights, Bed-Stuy, Crown Heights, Park Slope and beyond, as well as relieving some pressure on Dumbo.

Vinegar Hill, a block from the Manhattan Bridge overpass, has the newly restored 231 Front Street, with a dozen tiny spaces and more smalls coming on line this summer.

Office rents in the great Willie-B approach $40 a foot, when they can be found. Not for the faint of ‘cart’ – $$ that is. The top Gowanus multi-story buildings can get $20 a foot if they ask – where Dumbo was at several years ago.
Previous editions of Commercial Klutch can be read here.