As the coronavirus swept across New York, images of a deserted midtown Manhattan became emblematic of the pandemic’s devastating economic impact. Throughout the summer, journalists chronicled midtown’s uncertain future; even now, with vaccination efforts progressing, landlords of commercial offices and large retail spaces worry about midtown’s viability in a future of increased remote work and a lingering fear of crowded spaces.
In Downtown Brooklyn, the mood is a bit more optimistic.
Brooklyn’s historic central business district also suffered during the pandemic. But the area’s boosters and developers believe its location, open spaces, and large residential population could give it a leg up over Manhattan as the post-pandemic recovery finally begins.
“Covid taught us a bunch of different things about the world,” said Ofer Cohen, co-chair of the Downtown Brooklyn Partnership and President of TerraCRG, a real estate brokerage that works exclusively in the Brooklyn commercial real estate market. “And coming back, we think that Brooklyn, and Downtown Brooklyn specifically, is gonna have an edge over Midtown when employees and big companies are rethinking new office space.”
The 2004 Rezoning
To understand Downtown Brooklyn’s role in a post-pandemic future, it’s important to look at the area’s recent past. Because before the pandemic, Downtown Brooklyn was at the zenith of a revitalization effort over 15 years in the making.
The numbers should be unsurprising to anyone who has watched the area’s skyline erupt in a seemingly endless procession of new skyscrapers, but they bear repeating: since the area was rezoned in 2004, at least 41 million square feet of residential, commercial, and institutional space has been built or planned in the neighborhood; that’s about fourteen-and-a-half Empire State Buildings. A 2016 report by NYU Wagner’s Rudin Center said the area’s transformation growth has “few parallels in New York City’s recent history.”
Among other goals, the 2004 rezoning had as its primary aim the creation of new commercial office space. This type of effort was far from new; in the 80s, then-Mayor Ed Koch enabled the creation of the 4.5-million square foot MetroTech Center complex as a way to keep the back-office operations of Manhattan’s financial services companies in New York, rather than allowing them to move to more affordable New Jersey.
In July 2001, Senator Chuck Schumer’s “Group of 35” and the Brooklyn Chamber of Commerce’s Downtown Brooklyn Council successfully pushed for the creation of the Special Downtown Brooklyn District, in which relaxed height restrictions and setback requirements were designed to encourage denser office development for companies now returning from the suburbs.
The September 11th attacks—which destroyed over 13 million square feet of city office space—and subsequent concerns about the security risk posed by concentrating financial institutions in lower Manhattan resulted in newly-elected Mayor Michael Bloomberg’s quick embrace of high-density development in Downtown Brooklyn. But he and Deputy Mayor Dan Doctoroff decided that for the plan to succeed, the city needed to offer more than simply commercial office development rights.
Their plan, which the City Council approved in 2004, called for extensive upzoning throughout the Downtown Brooklyn area; new facilities to support the emerging cultural district being shaped by the Brooklyn Academy of Music (BAM); the inclusion of ground-floor retail in new buildings; and streetscape and transit improvements, among other investments.
The goal, according to a presentation from the city’s Economic Development Corporation (EDC) and Department of City Planning (DCP), was to “foster a multi-use urban environment… Building on the success of previous development efforts that have retained and attracted companies in New York, the plan would create new retail and housing, and would foster expanded academic and cultural facilities.”
An Accidental Mixed-Use Community
The city had projected that the proposed zoning changes would lead to the construction of 4.5 million square feet of new commercial office space and about 1,000 new residential units.
That is not what happened. While the area saw a 26% increase in jobs from 2010-2015—a higher growth rate than the borough and the city overall—practically no new office space was constructed in Downtown Brooklyn in the decade after the rezoning. Instead, the intense demand for housing created thousands of new apartments.
“The need for housing was so dire that the demand surpassed that for office space,” Cohen said.
A 2016 report by Brooklyn Borough President Eric Adams estimates that over 11,000 housing units had been developed or were in the pipeline that year, and growth has not stopped since. A report released by DCP this week found that Brooklyn Community District 2, which includes Downtown, had the third-highest rate of new housing units added citywide, behind only Williamsburg-Greenpoint and Manhattan’s West Side.
That many of the new apartments are pricey condos and rentals built within luxurious high-rises has rankled local residents and elected officials, as has the resulting stress on neighborhood infrastructure and schools (a recent report by the Downtown Brooklyn Partnership found about 21% of the new rental units created in the area were subject to some sort of rent regulation, though whether that makes them truly “affordable” is another question).
Nevertheless, the emergence of a sizable residential population may now prove pivotal in keeping the area’s commercial and retail sectors afloat.
“The success of Downtown Brooklyn is that it’s a mixed-use downtown now,” said Regina Myer, president of the Partnership, an entity that was itself created as part of the rezoning. “It used to be a shopping corridor and a strong government sector, but over the years we’ve had a lot of new residents.”
While some advocates have proposed converting Midtown office space to housing, in Brooklyn, Myer said, “we’re already there.”
The built-in residential population, along with residents from adjacent neighborhoods like Fort Greene and Brooklyn Heights, may have blunted the worst of the impact from shutting down most of the neighborhood’s 17 million square feet of office space last year. In September 2020, pedestrian counts in the neighborhood were about 57% of what they were the year before. That’s a significant drop, but it’s nothing compared to Midtown: in that same time period, pedestrian counts in Times Square were at 28% of their 2019 number.
“Whether it was the Christmas market, or Soulcycle, or generally people wanting to have a place for kids to be able to scooter without being worried about cars, the MetroTech Commons were very active through the pandemic,” said Ali Esmaelizadeh, Senior Vice President at Brookfield Properties, which owns the MetroTech office complex in Brooklyn as well as several major office properties throughout Manhattan.
“The office buildings are in similar occupancy mode as the rest of the city, though we are seeing a gradual increase,” he said. But you’re also seeing a great deal of ground floor experience from the residential community taking advantage of the open spaces.”
The area’s open spaces have served purposes beyond just leisure. In late August, the Partnership announced an arts residency initiative that allowed artists and arts organizations to rehearse outdoors. BAM broadcast video art on its large outdoor sign at Flatbush and Lafayette avenues.
All that activity has been a lifeline for many retail businesses.
The closing of local courts and office buildings has devastated restaurants reliant on a consistent lunch crowd, Randy Peers, president of the Brooklyn Chamber of Commerce, said. And the neighborhood lost some retailers to larger economic forces, like the two Fulton Street Modell’s locations that closed after the company declared bankruptcy in early March. Nevertheless, many other retail sectors in the area have managed to scrape by.
“Downtown Brooklyn and the retailers there have fared much better than in other places,” Peers said. “That’s in part because of the continued presence of anchor retailers like Trader Joe’s and Target, and in part, because it’s a mixed-use area that doesn’t just rely on office workers.”
Looking To The Future
The dichotomy between the experience of Manhattan and Downtown Brooklyn during the pandemic may offer clues about what happens after the pandemic ends.
Residential development still outpaces office growth in the neighborhood, but millions of square feet in commercial projects have come online in recent years, including Tishman Speyer’s 620,000-square-foot Wheeler building and JEMB Realty’s 500,000 One Willoughby Square. Those buildings will supplement the existing, mostly older, Class-B office stock near the courthouses.
Downtown Brooklyn’s office 17-million-square-foot office market is still much smaller than, for example, Midtown South’s 74 million square feet. And though demand for Downtown Brooklyn office space had shrunk the commercial vacancy rate to a minuscule 2-4% in the years before the pandemic, no commercial district will be fully immune from whatever changing work habits emerge in the post-pandemic era.
Even so, Downtown Brooklyn’s office landlords believe the neighborhood is well-positioned for whatever comes next.
“When employees and big companies are rethinking their vision for new office space, there’s much more opportunity for outdoor integration, there are bigger floor plates that allow for more social distancing, more opportunities for private spaces that allow for more security and privacy,” said Cohen. “And if you can walk to the office, you don’t need the subway system.”
In fact, the newness of much of Downtown Brooklyn’s office stock may itself be an asset.
“More companies are going to be more dependent on great infrastructure, IT and so forth, because I do think there’s going to be a bit more flexibility in how people work,” Esmaeilzadeh said. “For example, you may see more virtual calls and so forth. Everything in Downtown Brooklyn has gone up since the early 90s, so it’s all, in the span of real estate, brand new office buildings.”
The mix of office tenants in those buildings may also evolve as a result of the pandemic. In recent years, the neighborhood had already shed its reliance on government and financial back office tenants. The Partnership has long looked to position the area as a hub for tech companies, and indeed, tech, advertising, media, and information (so-called “TAMI”) jobs more than doubled in Downtown Brooklyn between 2010 and 2015 (similar growth has occurred across the borough, though Downtown has been among its largest beneficiaries).
Those tenants include entities that straddle media and tech, like Slate and podcast company Gimlet Media, as well as companies like 3D printer creator Makerbot and mobile network GoTenna. Etsy and digital agency Huge are in nearby DUMBO.
That critical mass may grow in the coming years; a July 2020 survey of office tenants by the Partnership found that tech startups in the area reported fewer layoffs and business disruptions than firms in other sectors.
Many of them have also grown in the last decade: BAM opened its 40,000-square-foot Fisher Center in 2012; the New York City College of Technology created a 360,000-square-foot building at 300 Jay Street; NYU Tandon transformed the 500,000 square feet at 370 Jay Street into a collection of labs, classroom, and retail space; LIU added over 370,000 square feet of new space to their campus with the construction of One University Plaza.
Before the pandemic, Downtown Brooklyn’s 60 cultural institutions received 4.5 million annual visitors annually, generating $300 million in annual economic activity. And the 11 institutions of higher learning educated over 45,000 students each year. When students return to classrooms and audiences to performance spaces, their economic impact will be immense.
Meanwhile, new development continues, and not just in the office market. The Ace Hotel chain recently announced plans for a new 287-room location at the corner of Schermerhorn and Bond streets, and nearly an entire block of Fulton Street has been demolished to make way for a large new mixed-use building.
What Does Downtown Brooklyn Need?
Still, Downtown Brooklyn’s future success will likely depend not just on new office stock or proximity to residential areas—even the Partnership’s own survey found many firms are considering some type of hybrid work-from-home strategy after the pandemic—but on the quality of the experience people have when they do come to the area. That means, above all, attractive public spaces, appealing retail businesses, and exciting cultural offerings.
Even before the pandemic, the Partnership had pushed for major public realm improvements; in January 2020, the organization released a “vision plan” created by architecture firms BIG and WXY that looks to improve the area’s pedestrian experience with new furniture, wider sidewalks, and improved street crossings. The city’s success in converting outdoor space with its open streets and open restaurants program has only strengthened that resolve.
“If anyone was skeptical, they were proven wrong,” Myer said. “New Yorkers understand the value of public space and streets for walking and even the ability to have a meal. It’s not just the parks; it’s also the location right around the corner.”
The priorities of a new mayoral administration and an almost completely new City Council could also have a big impact on the area’s future. Unsurprisingly, some property owners are skeptical of the city’s ascendant progressive left wing, which helped beat back rezonings designed to grow the presence of Amazon and Industry City.
“We need to encourage voices that understand that job creation and economic development are coming from investment and from businesses,” Cohen said.
Still, nearly all the stakeholders recognize that a proactive public sector will be crucial to a successful post-COVID comeback. Businesses ranging from performance spaces to restaurants to hospitals will likely depend on some type of stimulus funding to make it through the next several months, and whoever the next mayor is will have to address concerns about an increase in violent crime and a perceived increase in quality-of-life issues citywide.
For now, though, expanded access to the vaccine remains at the top of everyone’s wishlist.
“The last nine or ten months have been really tough,” Myer said. “We can’t ignore the bigger picture.”