Brooklyn Investment Sales Pick Up, But First Half Down Big

After cratering in the first quarter, Brooklyn investment sales rebounded in the second quarter, though there’s still a long way to go to compete with 2022’s banner year.

The dollar volume of investment sales in the borough rose 35 percent from the first quarter to the second, according to TerraCRG data reported by the Commercial Observer. There was approximately $1.5 billion traded in 281 transactions in the second quarter.

The improvement from the first quarter is significant, but the downward spiral from the first half of last year may be more notable. During the first six months of 2022, dollar volume of investment sales in the borough approached $5.3 billion. This year, the dollar volume wasn’t even half that, hitting only $2.6 billion during the same period.

Inflation and elevated interest rates are the biggest drags on investment sale activity in the borough. Owners are also wary to sell because of how increased capitalization rates may impact valuations.

The multifamily market saw a 35 percent drop in transactions between the first half of this year versus last year, and a 49 percent decrease in dollar volume traded. Regulation on rental buildings — such as affordable housing requirements — and the expiration of 421a contributed to the decline.

But when looking at the same time periods, investment sales declined across most property types, both in terms of dollar volume and total transactions. There were exceptions, though. Retail dollar volume made a slight gain, while the industrial market saw more total transactions. Development deals, meanwhile, increased in both metrics.

The first half’s largest investment sale this year took place in Brooklyn Heights in the first quarter, when a Rockrose Development affiliate purchased St. Francis College’s campus for $160 million; that deal has since become mired in a lawsuit.

The second quarter’s largest investment sale was affordable housing developer Tredway’s $150 million purchase of the Sea Park Apartments from Arker Companies in Coney Island. Private equity giant Carlyle’s $100 million purchase of a two-tower 421a site in Gowanus brought the number of nine-digit investment deals in the year’s first half to three.

TerraCRG chief executive Ofer Cohen told the Observer that the market’s potential for growth in the coming months is surging as discount purchasing opportunities emerge and the Federal Deposit Insurance Corporation prepares to unload roughly $60 billion in Signature Bank loans.

— Holden Walter-Warner