News for the Hospitality Executive
Hotel Market Intelligence Report: Downtown Brooklyn, New York
By Marina Kazartseva
February 21, 2012
An increase in visitors to Downtown Brooklyn’s growing array of commercial and leisure attractions has brought an influx of new high-end hotel supply, helping occupancy and average rate levels across the borough.
When we talk about “gateway” cities, Brooklyn is the real
deal. Immigrants have come to the U.S. through Brooklyn for centuries,
and the area’s exponential expansion has resulted in approximately 2.5
million residents, 33,000 businesses, 410,000 employees, and a legacy
of culture and commerce that continues to send out roots. New York’s
most populous borough offers lower operating costs and ample commercial
and industrial space compared with Manhattan, two factors that have
helped promote business growth and demand for area hotels.Downtown
Brooklyn hosts New York City’s third-largest central business district
after Midtown and Downtown Manhattan. Due to its proximity to Lower
Manhattan and favorable local and regional mass transit access,
Downtown Brooklyn benefits from a valuable position in the New York
City area as a competitive office space alternative to New Jersey, Long
Island, and Westchester County. The Downtown Brooklyn office market
contains more than 11 million square feet of office space.
Commercial and residential developments boomed in Brooklyn
following a rezoning initiative in 2004. Since 2006, almost $3.4
billion in private investment has been made in Downtown Brooklyn
developments, resulting in over 5,200 residential units, 1,000 hotel
rooms, 590,000 square feet of retail space, 236,000 square feet of
office space, and an 18,000-seat sports arena 1.
Billions of dollars in private investment and $300 million in public
improvements are currently underway.
The MetroTech Center was conceived as a means of rejuvenating
the downtown area and has generated over $1 billion in new investments
over the past decade. Anchor tenants include JPMorgan Chase, Goldman
Sachs, Verizon, and the Bank of New York. The complex is integrated
with the Polytechnic Institute of New York University, NYC College of
Technology, and Long Island University.
Some 300 businesses occupy Brooklyn Navy Yard, representing a wide array of commerce, from filmmaking to ship building. An enclosed 15-acre production facility for Steiner Studios was developed on the site in 2004, creating the largest and most modern movie-making complex east of Los Angeles.
Construction on the 22-acre mixed-use Atlantic Yards Arena and Redevelopment Project started in March of 2010 at an estimated cost of $4.9 billion. The new development encompasses Barclays Center, an 850,000-square-foot sports and entertainment arena that will host the New Jersey Nets; 6,430 residential units; 628,000 square feet of commercial space; 256,000 square feet of retail space; and a 180-unit hotel.
The following table shows the ten-year unemployment trend for Brooklyn versus the New York-Northern New Jersey-Long Island MSA, the state of New York, and the U.S. as a whole.
While the numbers show Brooklyn’s
unemployment to be well above that of the MSA and state, actual job
growth paints a different picture. Design and management consulting
jobs grew by approximately 20%, architecture jobs by 8%, and accounting
jobs by 6% in 2008 2.
Brooklyn-based film and television productions increased hiring by more
than 50% the same year. The recession stalled employment at the end of
2008 and took a deeper toll in 2009. Unemployment stabilized in 2010,
as new housing developments and an expanding restaurant industry
reportedly helped create a need for new hires.
Downtown Brooklyn lies just a few minutes across the Brooklyn
Bridge from Downtown Manhattan; an estimated 150,000 vehicles cross the
bridge daily. Its location has made Brooklyn attractive for
Manhattan-bound travelers looking to save money. More recently,
Downtown Brooklyn has emerged as a tourist destination in and of itself.
Brooklyn Bridge Park, which opened in 2010, was named one of the “World’s Coolest New Tourist Attractions” by Travel and Leisure and was heralded as “a key and very promising early step in a larger project that includes the greening of the East River waterfront3 .
Arts and cultural institutions include the Brooklyn Museum of
Art, the second-largest art museum in New York City; the Strand
Theater, whose expansion is scheduled for completion in 2013; the
Brooklyn Transit Museum, which recently re-opened after extensive
renovations; the 150-year-old Brooklyn Historical Society; and the
Brooklyn Academy of Music. Each of these institutions is known
worldwide and together they bring in hotel demand from a wide range of
Lodging Market Overview
Brooklyn’s lodging industry comprises more than 40 hotels and approximately 3,650 rooms—a near doubling of the number of hotel rooms over the past five years. For decades, Downtown Brooklyn offered only one full-service hotel, the Marriott Brooklyn Downtown. But new and proposed high-quality, full-service branded and independent hotels are shifting the balance of lodging options in the borough.
Despite the financial challenges caused by the most recent recession, eight new hotels totaling 788 rooms were developed in the Greater Downtown Brooklyn area in 2010, with seven more hotels totaling 643 rooms in 2011. At least three new hotels are under construction, with several more proposed. The following table represents the new lodging supply pipeline for the Greater Downtown Brooklyn market from 2010 to the present.
Lower land costs versus Manhattan and special tax incentives for new hotel developments have provided the main thrust behind these developments in Brooklyn. It is important to note, however, that room rates for Brooklyn hotels have historically been about 15% below those of comparable hotels in Manhattan, while labor and other operating costs have been on par.
Local hoteliers report that demand levels have strengthened rapidly over the past two years, and the market has largely absorbed the recent influx of new hotels. Increased corporate activity in Downtown Brooklyn has contributed to the rise in demand, as have weddings and other SMERFE-related group functions. Downtown Brooklyn is becoming a popular international tourist destination, and leisure demand is anticipated to keep trending upward in the near future. In addition, the entrance of new high-quality hotels has allowed local hotel operators to increase average room rates over the past year. Rate growth rebounded in 2010 and kept rising for most of 2011. Average rate growth is expected to continue as local hotels regain pricing power in line with the growing commercial and leisure demand in the market.
ConclusionThe recent recession put pressure on the economy of Downtown Brooklyn, but new developments continue to spring up. The interwoven network of commercial and leisure interests in Brooklyn has helped it absorb the brunt of the national downturn, and data show that area hotels have begun to bounce back. Proximity to Manhattan makes Brooklyn an attractive alternative for developers and travelers alike. As economic conditions continue to improve, so do the prospects for a new landscape of hotels in this historic borough.
1 Downtown Brooklyn Partnership
2 Brooklyn Chamber of Commerce
3 “The Greening of the Waterfront.” The New York Times Architecture Review. April 1, 2010. http://www.nytimes.com/2010/04/02/arts/design/02bridge.html?pagewanted=all
About Marina Kazartseva
Marina Kazartseva is a Project Manager based out of HVS’ satellite office in Wilmington, Delaware. Marina has worked in the hospitality industries of Belarus, Cyprus, Ireland, and the United States. Marina earned her Masters degree in Hospitality Real Estate and Finance from Cornell University’s School of Hotel Administration, where she completed internships with Starwood Hotels & Resorts and the historic Jumeirah Essex House hotel in New York. She also holds a Bachelor of Science degree in Economics from the Belarusian State Economic University. Contact Marina at +1 (347) 570-5727 or email@example.com.
HVS is the world’s leading consulting and services organization focused on the hotel, restaurant, shared ownership, gaming, and leisure industries. Established in 1980, the company performs more than 2,000 assignments each year for virtually every major industry participant. HVS principals are regarded as the leading professionals in their respective regions of the globe. Through a worldwide network of 30 offices staffed by 400 seasoned industry professionals, HVS provides and unparalleled range of complementary services for the hospitality industry.
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