Bloomberg: Brooklynites Can Work Near Home as Offices Start to Rise
Bloomberg’s David Levitt recently spoke with Toby Moskovits of Heritage Equity Partners about real estate developments in Brooklyn. Moskovits is the founder and CEO of the real estate firm.
Via the article:
When Toby Moskovits was a little girl and her grandfather repaired Army uniforms in a factory near Brooklyn’s Williamsburg waterfront, the area was well into its decline as an industrial center.
Now, a couple blocks away, she’s planning what may be the borough’s first ground-up speculative office project in four decades. The building she calls the Williamsburg Generator won’t be your father’s workplace, with just desks, phones and computers. In Moskovits’s Brooklyn, an office can accommodate light manufacturing, or space for product testing.
“You look at the 1800s in Brooklyn, and think about the names on the streets —Havemeyer, Roebling, the amount of industrial innovation that took place here,” said Moskovits, 38. “Developers and owners are reacting to a movement that I think had been under way for five years, and that’s a return to what I would describe as its industrial roots.”
Moskovits, the head of development firm Heritage Equity Partners, is in a vanguard of real estate entrepreneurs betting on offices in a part of Brooklyn that can’t seem to build residences fast enough. Their projects will begin to meet growing demand from a generation of workers who no longer see the borough as a place to sleep between commutes to and from Manhattan.
“A number of developers have woken up to the long-term opportunity here” for offices, said Tucker Reed, president of the Downtown Brooklyn Partnership, a business advocacy group. “We’re starting to see the market react to that.”
According to the Brooklyn Chamber of Commerce — whose president a year and a half ago begged real estate executives to “please build offices!” — more than 3 million square feet (279,000 square meters) of work space are being constructed or converted from other uses in an area from Red Hook up through Williamsburg, Bushwick and Greenpoint to the Queens border. That’s more than all the office space in Manhattan’s 1 World Trade Center, the Western Hemisphere’s tallest building.
Moskovits and her partners in 2012 bought the vacant lot on Williamsburg’s Kent Avenue and North 12th Street where she intends to put her 400,000-square-foot, nine-story building. She received $65 million in financing from Madison Realty Capital to help fund the project.
Moskovits saw the need for offices the year before the purchase, when she owned a retail property on North Sixth Street that houses an American Apparel store.
“On the second floor was a gaming company,” she said while sipping tea at the Wythe Hotel, a converted 19th-century factory nearby. “I remember walking into the building and I could have been in Silicon Valley — great open space, the guys had Adirondack chairs. And I asked where these guys lived and they said in Williamsburg, and we have lots of friends tucked above bodegas all around the neighborhood.”
A development partnership including Normandy Real Estate Partners, Royalton Capital and Princeton Holdings saw a similar void in Bushwick, where they plan to convert a former financial printshop at 333 Johnson St. into a mixed-use project with 100,000 square feet of “imaginative office and flex space.”
“What we’d really been looking for is something that has enough scale to it where you can really provide an opportunity for the food and beverage community, the artist community and the commercial users, who desperately want to have the ability to operate their businesses in Bushwick,” said Paul Teti of Morristown, New Jersey-based Normandy.
In Williamsburg, known more for its artisan eateries, vintage clothing stores and music venues than dedicated office space, some high-profile companies have managed to find a home. Vice Media Inc., publisher of Vice Magazine, moved last year from a small warehouse to one about twice as big. Amazon.com Inc. operates a fashion photography studio near Moskovits’s site. Adidas AG, the sneaker company, recently made a deal for a design studio upstairs from where the Brooklyn Brewery makes its beer, according to Crain’s New York Business.
In the neighborhood’s most ambitious project, Two Trees Management Co. plans about 600,000 square feet of offices as part of its redevelopment of the oldDomino Sugar plant on the waterfront. Conversion of the historic refinery building into work space is about three years away from completion. The Domino complex will be mostly residential, with plans for more than 2,200 apartments.
Rental buildings are still more attractive for real estate companies given the costs of constructing offices, said Jason Muss, developer of projects including the Brooklyn Renaissance Plaza mixed-use tower downtown and the Oceana residential complex in Brighton Beach.
“The cost of building first-class office buildings would require rents in excess of what the market can provide,” he said at a conference Thursday in downtown Brooklyn. “I don’t see that changing any time soon.”
The vacancy rate for the about 17 million square feet of offices in downtown Brooklyn plummeted to 3 percent from 10 percent in the past three years, according to Reed. That’s enabled developers at some new projects to raise rents.
At Dumbo Heights, a 1.2 million-square-foot development in properties once owned by the Jehovah’s Witnesses, Jared Kushner and his partners are asking more than $60 a square foot for offices, Reed said. The price is close to the average asking rent in Manhattan’s midtown south, the tightest U.S. office market and a magnet for technology companies such as Google Inc. and Facebook Inc.
Carlo Scissura, the Brooklyn Chamber of Commerce president who urged a conference of developers in early 2014 to consider offices, said that while he loves Moskovits’s project and the upturn in conversions, it’s not enough.
“I get upset when I look at the new Brooklyn skyline and all I see are residential buildings and no new office towers,” he said. “We need office construction borough-wide, and we need to make it happen fast.”
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