Commercial Observer Excerpts
Ofer Cohen, the president of TerraCRG, founded the Brooklyn-focused
commercial brokerage and advisory firm in 2008 after a stint as a broker
at Massey Knakal Realty Services preceded by time as a partner in a
boutique marketing agency. TerraCRG seals roughly 70 deals per year. The
firm recently closed the sales of four multifamily buildings in Park
Slope and Carroll Gardens for a collective $12.5 million and inked a
lease to bring the first Doughnut Plant bakery to the borough in
Prospect Heights. Mr. Cohen invited Commercial Observer to the
company’s office that sits opposite the Barclays Center to dish on the
Brooklyn market, contextual rezoning and military discipline.
Commercial Observer: What was the market like in 2013 and what’s it like this year?
Mr. Cohen: In 2013, commercial sales in Brooklyn totaled $5
billion. This was a fivefold increase from 2010, when we only had $1
billion in sales. And we were well positioned to take advantage of that
boom, having established ourselves during the recession and really
focusing only on Brooklyn. This year we’re shooting to do 80 or 90
But what is interesting about this year in the Brooklyn market
is—specifically for us—the size of the transactions in Brooklyn is
getting significantly bigger. Our average listing now is significantly
higher than last year. In the first half of 2014, we either closed or
put under contract approximately $350 million worth of real estate in
Brooklyn. Our goal is to almost double what we did last year. A big
portion of it is large development site sales transactions. When the
value of the properties doubled or tripled, in some cases, in the core
neighborhoods of Brooklyn, the size of the assignments also sort of went
with it. We currently have numerous listings in the $20 million-plus
range that we’re handling. And we think that in 2014, we will [go up]
from $5 billion in the market as a whole to $6 billion-plus, which is
roughly a 15 to 20 percent dollar increase.
What are the best neighborhoods for sales in Brooklyn right now?
The greater Downtown Brooklyn area that includes the brownstone
neighborhoods around it, the north side of Williamsburg and Park Slope.
What’s nice about where we are in the market right now [is that] these
markets are maturing in rent. Once [residential] rents are getting to
the $65 a foot range, they compete or sometimes they’re a little more
expensive than some neighborhoods in Manhattan. The north side of
Williamsburg is more expensive than the Upper East Side. You see the
secondary tier of neighborhoods—primarily Bed-Stuy, Crown Heights, North
Crown Heights, Bushwick—kind of catching up with that market.
Another thing that’s very interesting for where we are in the market
right now is that of 13,000 units under development, in the different
stages of the development pipeline, only about 1,000 are condos; the
rest are rentals. And we think that we’re about to see the beginning of
the next condo boom. Condo pricing in the primary neighborhoods I just
mentioned have gone up tremendously just because there’s no inventory.
We think the market is about to change as a result of it. Prices of land
are going to adjust to fit condo pricing more than rentals.
Do you think we’ll ever see a day when Brooklyn rents match those in Times Square or on Madison Avenue?
We’re actually in the process of really expanding our retail leasing
division and hiring a couple senior retail leasing agents because we
believe that’s the next stage of development in Brooklyn. You see a huge
demographic shift in these neighborhoods—first residential now
retail—because retail is going to have to come up to cater to these new
demographics in all these neighborhoods. So places like Bedford Avenue
in North Williamsburg have really been exciting places to watch in terms
of the retail. We sold a [4,250-square-foot] building on Bedford Avenue
for about $1,870 a foot. It was a pure retail play. The address was 132
Bedford Avenue. [The buyer was RedSky Capital.]
What has Barclays Center done for Downtown Brooklyn?
We just signed two leases in this neighborhood [including Doughnut
Plant and a lease for Brooklyn's first Patsy's Pizzeria]. Obviously the
Barclays Center was a huge success. As soon as it opened, most people
that were opposed to it realized that it was a great thing for Brooklyn.
It’s a great thing for the city.
From a retail perspective, we’ve seen retail rents triple right
across the street and double as you go further out. Shake Shack is about
to open any day now right across the street and there’s a couple new
restaurants that are coming. We live in this neighborhood and we’ve been
here through the development. We think it’s all positive change. The
economic vitality of the neighborhood improved so much that it’s just a
very exciting place. If you’re talking about context, here what is
really nice is that landlords have been very aware and thoughtful when
they think about what kind of restaurants they rent. They want to make
sure that these are things that people in Brooklyn or people that come
to Brooklyn are coming for. So I think you’re going to see a lot of
restaurants and you’re going to see a lot of retail but you’re going to
see less chains and less national outfits and more higher-end