Technology has changed irreversibly the face of real estate, giving a sense of community among all those connected. A recent KPMG survey found that New York City will eclipse Silicon Valley’s tech scene in the next four years due to its increasing number of incentives and government-backed programs.
While Manhattan has clearly emerged as a rock-solid tech hub, its neighbor to the East is a shier, yet well-contoured tech titan-to-be that houses the campuses of large players in the market such as Etsy, Kickstarter and Livestream. Brooklyn is attractive to tech companies not only for its shorter commutes and cheaper rents, but also because of its rich offerings of shared workspaces and bohemian offices. Justin Fitzsimmons, research analyst at GFI Realty, sheds light on how these companies are driving a real estate boom across many Brooklyn neighborhoods.
How does Brooklyn’s tech-driven economic growth relate to New York City’s tech expansion?
Fitzsimmons: Brooklyn’s tech-driven economic growth speaks volumes to New York City’s overall tech expansion. We’ve seen big players such as Google come in heavy with a $2.4 billion purchase of the 1.2 million-square-foot Chelsea Market and we’ve seen Spotify lease 564,000 square feet at 4 World Trade Center for its headquarters. Both are located in trophy buildings in established Manhattan neighborhoods. However, Brooklyn and other outer boroughs are no longer competing with Midtown South and the Financial District, but complementing them.
We’re noting the rising pricing for office space in Manhattan, but we’re also seeing that ripple effect. Kickstarter, Vice Media, Amplify, Etsy, Livestream, HUGE and MakerBot have one important thing in common: their locations. These big-name companies, all located in neighborhoods commanding some of the highest residential rents and seeing unprecedented new office space development, are actually driving economic growth in the borough.
In the past, the city’s tech scene recorded rapid growth because there’s a multitude of startups that call Brooklyn home as well as a plethora of new ones that are not only filling the existing office space and upcoming new campuses, but forcing investors to keep the office development ball rolling as Brooklyn continues its role in securing New York City’s title as the nation’s second-largest tech hub.
What are the trends shaping up the borough’s commercial real estate landscape due to the tech influx?
Fitzsimmons: The tech influx in Brooklyn is shaping the commercial real estate landscape in ways that was hard to imagine 15 years ago. Former areas of booming industry—waterfront neighborhoods such as Williamsburg, Brooklyn Navy Yard, Dumbo, Gowanus, Sunset Park and Long Island City—were left barren after industry in the city began to collapse, resulting in neighborhoods left in states of disrepair. Years later, those abandoned warehouses and waterfront properties would become rife with opportunity. Following rezonings of former industrial areas, underserved subsections became hotbeds for upscale residential development and ideal for new commercial development.
Tech companies need space and today’s business model differs from that of yesteryear. Brooklyn’s work pool aims for live-work-play settings. A younger workforce wants to work a short walk or bike ride away from work and get lunch in the building’s food hall or on-site café. Lastly, they need open workspaces where collective thoughts can be shared, where the corner office is for everyone.
How are developers adapting their strategies to the changing office market and increased demand?
Fitzsimmons: The new commercial developments that are housing tech companies are being designed with these amenities in mind and their employees are happy to live in the idyllic neighborhoods in which these firms are born out of or have moved into. Developers, seeing the demand for more office space in the face of the growing tech market, are adapting their strategies by simply providing the product in demand.
For the smaller start-ups, coworking has become a trend that doesn’t seem to be going anywhere but up. Smaller companies need smaller spaces, so instead of building your tech company out of your Brooklyn apartment, as the co-founders of Etsy did, you can now lease small or single-office space in coworking locations. Some examples other than WeWork are Bond Collective, Industrious, Green Desk, Bklyn Commons, CoLab Factory, Compound Cowork, Industrious, Pencilworks and SHARED Brooklyn.
Additionally, there are larger-scale models like DUMBO Heights, a five-building, creative office campus. Dumbo Heights is just blocks from the Time Out Market Food Hall, which accentuates the game-changing nature of the residential development at 85 Jay St. These three developments and the developers behind them provide a great example of the ability of office, retail and residential to bolster each other and collectively create neighborhood growth.
Tell us more about the most representative projects highlighting the area’s growth as a tech hub.
Fitzsimmons: I think the project that best highlights Brooklyn’s continuous growth as a tech hub is Brooklyn Navy Yard. The apex of the Brooklyn Tech Triangle—Brooklyn Navy Yard, DUMBO and Downtown Brooklyn—is a 300-acre, 13 million-square-foot hub which currently provides New Yorkers 9,500 jobs in the manufacturing, technology and industry sectors. The vast, former U.S. Naval Yard has building-to-building shuttles, a ferry terminal and will soon have technologically advanced robotic, autonomous vehicles which will help employees get around easier.
One of the many buildings inside of Brooklyn Navy Yard is Dock 72, a ground-up construction that embodies the new style of commercial development. The 675,000-square-foot structure will feature floor-to-ceiling windows, landscaped terraces and the building’s unique design is just the beginning. Amenities include an espresso bar, juice bar and tavern. There will also be a gym, basketball court, rooftop conference rooms, its own ferry stop and bike valet. And the anchor tenant? WeWork.
Not only is Brooklyn Navy Yard’s size and job count the borough’s largest, but the vision for the future is the most promising to pushing Brooklyn further towards becoming the technology force that it’s seemingly poised to be. It speaks volumes as to where Brooklyn’s been, where it is today and most importantly, where it’s headed.
Elaborate on the neighborhoods we should keep an eye on and why.
Fitzsimmons: These would be Gowanus, Red Hook and Sunset Park. Due to its recent rezonings, Gowanus is getting closer and closer to a tech-oriented character, but we see it expanding as pricing rises in areas like DUMBO and Downtown Brooklyn. Red Hook has the space and increased investor interest. The only thing that seems to hinder a big boost in commercial development is transportation. However, with the NYC Ferry and the need for more space, I see Red Hook finally coming into play. Lastly, with the expansion of Industry City, as well as a number of other commercial campuses throughout the area, Sunset Park has room to grow.
How do you see the Brooklyn office market going forward?
Fitzsimmons: The multiple moves of Manhattan-based companies to the outer boroughs, combined with the proliferation of start-ups being founded in these submarkets is quite notable, demonstrating their true status as tech incubators. Additionally, with the success of both the commercial and residential sectors, each contributing to the other’s growth, it is no surprise that businesses and real estate investors alike have begun to see many neighborhoods in Brooklyn and Queens in an entirely new light.
When Kickstarter made the decision to move its headquarters from the Lower East Side to Greenpoint, the move was fairly unique. However, in the following years, that decision was emulated by a range of other technology, advertising, media and information firms and, subsequently, real estate investment in the outer boroughs has increased exponentially. As technology continues to grow in new neighborhoods, savvy developers will continue to build in the same areas, catering to the thousands of new employees that are lining up to grow alongside their employers.
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