A few years ago, even in Manhattan, building or converting an office property on spec was unheard of.
That is no longer the case, according to data from JLL, whose debt experts say the arrival of name-brand tenants has made office conversion deals in the boroughs increasingly appealing.
Class A vacancy in Downtown Brooklyn ticked in at a mere 3 percent in the fourth quarter of 2014, according to JLL’s numbers, and average asking rents were up 40 percent year-over-year, to just over $42 per square foot. In Long Island City, vacancy was 3.7 percent and average asking rents were up more than 35 percent from the same period in 2013, to $30 per square foot. For perspective, the vacancy rate in Manhattan was about 9.5 percent in Q4 2014, according to JLL.
“Most tenant demand is organic within Brooklyn, where companies such as Etsy and Huge have recommitted to the borough and expanded,” said JLL Managing Director Max Herzog.
A key force driving tenants to Kings and Queens counties is the city’s Relocation and Employment Assistance Program, he added. REAP is a tax credit for commercial businesses, excluding retail and hotels, that move to targeted areas in New York City, which include LIC and Downtown Brooklyn. The 12-year credit is equal to $3,000 per employee for companies relocating from Manhattan, according to the Economic Development Corporation’s website.