Shortage of Space Means Office Tenants Competing Again

What is hot and what if anything is not? This spring, the Downtown Brooklyn (DTB) area is experiencing a shortage of apartments for rent and sale, retail spaces, and yes, even office spaces. While Court Street and MetroTech have hundreds of thousands of feet still vacant, finding space that suits the tenants in the market is a major challenge.

Everyone knows about crazy prices and diminishing choices for houses and apartments. Agents searching for their clients know it first hand, as do the buyers and renters themselves. Those folks catch on to it first, then the press and the public notice. The brownstone belt around DTB is now the tightest since its peak in 2008.

Retail spaces in prime areas in and around DTB are scarce as well, with more tenants than spaces in the market. There seems to be no shortage of folks with burn-rate money creating new restaurants and shops. Chain tenants watch the market closely, sometimes grabbing the most visible spaces. The bridge and tunnel trendy tenant migration from the small island across the river continues. The chains and the B & T money mean stiff competition for start-ups and homegrown shops as well as steady displacement of legacy stores.

Although office space is widely available in the center of DTB, in DUMBO and Gowanus, it is very tight. That is why some businesses are increasingly opting to go down to Sunset Park for smaller, more affordable spaces. The areas around Court, Montague and MetroTech also don’t lend themselves well to most contemporary tenants, who are usually creative, client service and events businesses – many of these older buildings suffer from weak technological connectivity, with only a couple of addresses upgraded recently. DUMBO’s super-low 3.2% vacancy rate also hasn’t caused many tenants to move up the hill to Court and Montague, as the influx of creative-minded tenants are not yet comfortable in conventional office properties. We do see some exceptions, with those at 32 Court Street and 16 Court Street trying hard to capture these tenants and address the growing demand.

The bottom line is that with small spaces, someone else will take it if you don’t. Our advice: if you are lucky enough to see an office you love, grab it; if you see a space that meets most of your needs, sign it.

Chris Havens is a licensed broker with Creative Real Estate Group LLC, focusing on commercial and residential leasing and sales.