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BROOKLYN'S BOOM

New York City’s most populous borough steps out of Manhattan’s shadow

By Donna Mitchell

Brooklyn offers plenty of grist for trivia buffs, even on the subject of shopping centers. Take this tidbit: The New York City borough averages only 1.8 square feet of shopping center space per capita, compared with the U.S. average of 18.2 square feet.

Under different circumstances, such a market (if the borough were still an independent city, its population of 2.4 million would make it the nation’s fourth largest, according to the U.S. Census Bureau) would never be so drastically underserved, sources say. It is densely populated, and its consumers are out in force every day of the week at their favorite stores.

“Retailers would never overlook it, absolutely not,” said Faith Hope Consolo, chairman of New York City-based Prudential Douglas Elliman’s retail leasing and sales division.

And yet they have. For years national retailers have passed over Brooklyn in favor of Manhattan, which often houses their chains’ top-performing stores.

In explaining why shopping center development has lagged in Brooklyn, sources observe that there is not enough open space to allow large-scale development. Then there is the borough’s entrenched neighborhood culture, which has shoppers sticking to local shops for their everyday needs, says Michael Burke, director of the Downtown Brooklyn Council, a business advocacy organization.

But there are spaces available for large-scale development, if only New York City officials would take full advantage of them. Previous mayoral administrations were too busy with other issues to focus on shopping center development, says Consolo. In particular, vainly hoping that industry would return to the city, officials have refused to support zoning changes that would have let vacant factories be converted to prime retail space.

“Zoning has been a big problem,” said Patrick Breslin, president of GVA Williams Retail, a New York City-based real estate services firm. Among other things, he says, this has prevented New York City from developing one of its most valuable assets: its waterfront. “New York City has one of the most underutilized waterfronts in the world,” said Breslin. In this regard, the city has been put to shame by Boston, Chicago and Philadelphia, Breslin says.

Brooklyn’s waterfront is about as enthralling a place as any in the city, observers say. This becomes evident to anyone standing at the waterside in Red Hook, with its commanding views of the New York City skyline, Jersey City and the Statue of Liberty.

But for all Brooklyn’s paucity of retail, there are signs that things are looking up. National retailers have caught on to the borough’s virtues and are willing to pay higher rents when entering the market, says Breslin. Five years ago, Breslin says, he was arranging leases at $100 per square foot. Six months ago rents on some completed deals were just above $200 per square foot.

Ikea, for instance, plans to open a 330,000-square-foot store in Red Hook in the summer of 2007. The Home Depot opened two stores, one in Red Hook in 1999 and the other at Cropsey Avenue near Coney Island in 2001. In 2002 Home Depot opened a store at 640,000-square-foot Gateway Center, alongside BJ’s Wholesale Club and Target. Lowe’s opened a store last year near the waterfront. And Williams-Sonoma chose Brooklyn to launch its first West Elm store last year, figuring the 20-somethings living in the hip Dumbo (down under the Manhattan Bridge overpass) warehouse district would be drawn to its Gen-X furnishings.

Even Ann Taylor has leased a space on Montague Street in Brooklyn Heights. (At press time the opening was scheduled for late last November.) J. Crew and Talbots are planning to open on Montague Street by the first quarter of the coming year, and bookstore rivals Barnes & Noble and Borders are considering stores for the affluent Park Slope section, says Consolo.

At the same time, government has become more hip to the city’s needs. In particular, many credit Mayor Bloomberg’s administration with fostering new commercial real estate development all over the city, not least along the old industrial waterfronts.

Much of Brooklyn’s future development is going downtown. Fulton Mall — not a mall at all, but rather one of Brooklyn’s principal shopping streets — is a hub of department stores, including Macy’s, says Burke. The downtown district is entering a development phase not seen since the 1920s, the biggest of which is Atlantic Yards, Forest City Ratner’s planned $3.5 billion, 2.4 million-square-foot mixed-use center that will include 300,000 square feet of retail space.

It is expected that department stores will expand downtown over the next 10 years, which would add about 900,000 square feet of retail space to the area, says Burke. Macy’s says it will upgrade its existing store in Fulton Mall and put in new window displays. And though Brooklyn’s neighborhood denizens might generally resist national chains, the downtown is trying to attract such regional retailers as Century 21 and such nationals as Target and Kohl’s.

Downtown Brooklyn attracts “100,000 shoppers every day from Manhattan, Bronx and Queens,” said Burke. “We’ll see even more of that in downtown as you get the largest retailers moving in.”

Some retail developers are focusing on Brooklyn’s other neighborhoods. Triangle Equities, of Whitestone, N.Y., is building a 300,000-square-foot mixed-use project called Triangle Junction in racially diverse and middle-class Midwood. Target will anchor the three-level project, taking up the second and third levels, and a mix of tenants will occupy the ground floor. A few years ago big-box tenants would not have gone into second- and third-story spaces, preferring the ground level, says Lester Petracca, principal of Triangle Equities. “Now retailers are coming around and saying, ‘We have to be creative too,’ ” Petracca said.

Triangle Junction will offer a mix of national fashion retailers and restaurants, plus a five-level, 500-space parking garage.

In short, developers see potential in Brooklyn. Residential real estate has soared along with the affluence of many of the residents. This demographic change will boost demand for mid-range and high-end retail, says Petracca. “A lot has still not been tapped,” he said. “It is just a matter of being creative.”

Yet, for all these efforts to boost retail space in the borough, it will not make much of a dent in that seemingly dismal retail-per-capita statistic, experts say. The reason is that, with 2.5 million people living in a 72-square-mile area, Brooklyn is simply too densely populated, they say.

The good news for retailers is that, while the national average of retail space per capita might be more than nine times higher than Brooklyn’s, the trade area in the borough’s downtown is probably nine times higher than the national average, says Breslin. If most regional mall landlords were to try to capture a similar trade-area density, he says, they would have to draw a radius 25 to 30 miles from their mall sites.