In the world of developers, the group of companies that occupy the tech, advertising, media, and information sectors are all grouped under the acronym TAMI. Several years ago, the state of New York launched a program called Start-up New York that utilized space on State University and New York campuses for start-up companies. The success of the program is debatable, but it turned out to be a huge hit in Brooklyn, we previously wrote about it here.
Big Projects Needing Office Space
It was not long before Brooklyn started to see successful tech start-ups all over the borough, and that spurred construction on new residential units. As word of the new environment in Brooklyn started to get out to other entrepreneurs, there was a rush on Brooklyn that required even more residential space, and new office space.
Today, it is estimated that 9.6 million square feet of new office space will be developed in Brooklyn by 2020. It sounds like a dream come true for the people who have been working hard for the revitalization of Brooklyn for years. Brooklyn has even overtaken Manhattan as the borough of choice for the TAMI sector as more start-ups move into the area. But is there really that much of a demand for office space in Brooklyn?
New Offices Does Not Mean New Construction
The first real big office development project in Brooklyn that people are talking about is the Dumbo Heights project that is projected to add 960,000 square feet of manufacturing and standard office space to the Brooklyn market. While the Dumbo Heights project is impressive, it is not new construction.
Actually, much of the new office and manufacturing space Brooklyn will see over the coming years will be reconditioned buildings that used to be industrial sites. This is a double blessing for Brooklyn as it uses up old property that had been abandoned. This also allows developers to save on the cost of developing because the land is already prepared for a commercial building. The old shipping yards in Brooklyn are expected to add two million square feet of office space over the coming years, but it is not new construction.
Is Development Moving Too Fast?
Is Brooklyn development starting to outpace office space need? The tech sector continues to grow at a rapid pace and no development expert is sounding the alarm just yet. However, there are signs that developers may be getting ahead of themselves when it comes to building new office space.
In May 2015, Democratic presidential nominee Hillary Clinton gave a huge boost to the Brooklyn office space market when she chose to put her national campaign headquarters in 78,000 square feet of Brooklyn space. Since then, developers have been clamoring to buy abandoned industrial properties and start turning them into crisp, new offices.
If we look at something like the 25 Kent Project, we can start to see that developers may be getting ahead of themselves a little. The 25 Kent Project is actually a new construction project that is going to happen outside of downtown Brooklyn, but it is still part of the Brooklyn development movement. It is a $400 million project that will have a combined 500,000 square feet of manufacturing and office space. It breaks ground in September 2016 and is expected to be completed in 2018.
What makes the 25 Kent Project unique is that it was funded without the safety net of having pre-sold any space at all. Normally, funding companies want developers to sell some space in new buildings before they approve financing for a project. With 25 Kent, both the funding company and developer believe so strongly in the growth of Brooklyn that they decided to go ahead with the project without any pre-sales at all. It is an incredibly risky move, and 25 Kent was not originally counted among the 9.6 million square feet planned for 2020.
So Is The Demand Real?
The TAMI sector is a huge growth sector, and it is seeing more growth in Brooklyn than Manhattan or any other borough. Anytime a New York City borough can attract more business than Manhattan, it is going to get people’s attention.
The pace of residential development in Brooklyn has not slowed down, and developers insist that those new residents will want to work in Brooklyn as well as live there. At this point, even the banks are not seeing a slowdown in the need for Brooklyn office space. That means that developers have the green light to keep reconditioning old industrial facilities and give Manhattan a run for its money when it comes to attracting new business.