WeWork and Other Firms Test Brooklyn's Office Market

By Keiko Morris Features Dow Jones Newswires

Samuel Rudin, the late patriarch of one New York's oldest real estate dynasties, built the family's real estate portfolio with a rule: if a property wasn't accessible by subway, he wasn't interested.

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Now the Rudin family is tweaking that rule, adding another mode of transportation -- a ferryboat.

The Rudin family and office giant Boston Properties Inc. are in the midst of building a 675,000 square-foot office building on the Brooklyn Navy Yard's waterfront. Called Dock 72, the building stretches along a finger of land near working dry docks on the East River. Its riverfront doorstep will serve as the seconda stop on a ferry route from lower Manhattan.

The Rudin family now is saying "if you can't get there by subway and ferry, we don't want to own it," according to Bill Rudin, Samuel Rudin's grandson and chief executive of Rudin Management Co., the operating arm of the Rudin family's holdings. "People's commutation has totally changed."

Dock 72 -- anchored by a 220,000-square-foot lease with global co-working firm WeWork Cos. -- is part of a development surge in Brooklyn's emerging office market, where more than 3 million square feet of space is under construction. The project is one of several, including a 500,000 square-foot mixed-use development in Williamsburg, that industry executives are watching to see if enough appetite for office space exists from both homegrown Brooklyn companies and larger Manhattan firms. Dock 72 is expected to open next summer, with space ready for tenants to build out in the winter of next year.

In the second quarter of this year, Brooklyn office leasing reached 661,157 square feet, a 36% increase from the same period in 2016, according to a report from Cushman & Wakefield.

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A report from real estate services firm JLL noted, however, that larger lease deals will be necessary in the coming quartersto support the existing development pipeline. Many of the high-profile lease deals completed in Brooklyn over the last two years have been under 100,000 square feet.

"You haven't had that big pop to establish Brooklyn as its own office market, as opposed to a complement of Manhattan as a primary market," said Gabe Marans, corporate managing director at real estate service firm Savills Studley. "But I think it will happen. It's just a matter of time."

WeWork's co-working space is expected to bring small entrepreneurs that could expand into larger spaces in the building, Mr. Rudin said. At the same time, the team expects the project to draw a mixture of small businesses and larger companies, some native to the borough and others from outside looking to rebrand themselves, he said.

Connecticut-based United Technologies Corp. is one example of an outside firm looking to plant a flag in Brooklyn, Mr. Rudin noted. The company, which provides high-technology systems for the building and aerospace industries, announced earlier this year that it planned to hire 250 people to work and focus on innovation at the Empire Stores redevelopment in the Dumbo section of Brooklyn.

The Brooklyn Navy Yard's main mission is to create a modern manufacturing hub and generate those types of jobs for the surrounding communities. WeWork's presence is part of the yard's commitment to supporting small businesses, said David Ehrenberg, president of the Brooklyn Navy Yard Development Corp. He also envisions Dock 72 could bring in technology, design and architecture firms that could create a more diverse business environment and feed off business from other companies in the yard.

"That diversity has made New York so amazing, and it's harder and harder to find in New York," Mr. Ehrenberg said.

The location is considered by some to be transportation-challenged, with the closest subway stop about a 15-minute walk. But the development team noted the project has a number of options. Ferry service offers connections from Manhattan as well as other points in Brooklyn. The Navy Yard itself has shuttles to and from train stations. And the building, which also will offer valet bike parking and car parking, will have a Citi Bike docking station just outside.

Dock 72's design taps into the yard's industrial history aims to capture a creative vibe seen as Brooklyn's calling card.

The 16-story building's long, linear structure evokes the large ships and maritime history of the Brooklyn Navy Yard. V-shaped support beams on the bottom floors give the building an industrial feel. Corridors uninterrupted by columns run 550 feet long on either side of the structure's central core. S9 Architecture and Engineering PC was the design architect and Perkins Eastman the managing architect for the project.

The project features a 10,000 square-foot recreation space that can be used for events and concerts. The building, designed with input from WeWork, will be filled with amenities, including a basketball court, a gym with treatment rooms, areas for food and dining, plentiful informal lounge areas and 18,000 square feet of terraces.

"It's all about attracting and retaining employees," Mr. Rudin said. "That's why we're creating this environment."

Write to Keiko Morris at Keiko.Morris@wsj.com

(END) Dow Jones Newswires

August 21, 2017 00:08 ET (04:08 GMT)