Cost of NYC real estate pushes interest to Brooklyn

Brooklyn House

While interest in hotels in New York City’s midtown and financial districts is evergreen, the city is seeing increased development across the Brooklyn Bridge. Branded and independent hotels alike are growing in an ever-increasing range of Brooklyn neighborhoods.

As of late 2015, STR Global predicted that at least 20 new hotels were poised to open in Brooklyn in 2016. In total, 31 hotels are in various stages of development throughout the borough, with close to 3,500 rooms poised to open in the coming years.

Brooklyn House

“The larger context [of the growth] is the continued strong occupancy performance of New York City,” Jan Freitag, SVP of lodging insights at STR, said, noting that the city has consistently seen occupancies of over 80 percent in recent years. “There are a lot of new hotel rooms opening, but at the same time, demand doesn’t seem to be slowing down... That gets developers interested.”

While everyone wants a New York City presence, he continued, the best use of Manhattan real estate is a condo rather than a hotel. “So hotel developers can get pushed out of the market and get pushed across the bridges. Brooklyn is the obvious beneficiary because of the good access with the subway. You can build a hotel there that services Manhattan but at a fraction of the cost.”

Why Brooklyn?

Rick Day is the VP of marketing for Real Hospitality Group, which manages three branded and two independent hotels in Brooklyn. Over the last five years, RHG has opened the Aloft New York Brooklyn, the Hotel Indigo Brooklyn and the Sheraton Brooklyn New York, all owned by the Lam Group. In late 2015, the 34-room The Brooklyn - A Hotel opened in the Bedford-Stuyvesant neighborhood, and the BKLYN House Hotel opened in late December in Bushwick.

“We’ve seen a renaissance in Brooklyn,” Day said. “There's a lot more interest in the borough.” Brooklyn residents, he said, appreciate having high-quality local hotels for visiting friends or family rather than making them pay Manhattan rates and commute in. “We also see a lot of international customers who are more comfortable with public transportation and who don’t mind getting on a subway,” he added.

Neighborhoods that Day calls “up and coming” like Bedford-Stuyvesant, Crown Heights and Bushwick are getting independent hotels “that stay true to what the Brooklyn neighborhoods are” rather than opting for “cookie-cutter” brand standards. “These independent hotels are creating personalities based on where they’re located and what’s around them.”  

What’s opening?

Brooklyn is poised to get a healthy mix of both branded and independent properties this year. Three La Quinta hotels are poised to open by December, one at Atlantic Avenue and one by Union Avenue. Earlier in the year, a Holiday Inn is opening by the Barclays Center, a Sleep Inn is opening in the Brownsville neighborhood, and a Comfort Inn is slated to open by the end of February.

Independent hotels on the horizon (as of press time) include the 1 Hotel Brooklyn Bridge Park, The Williamsburg Hotel, the Even Hotel Nevins Street and a new member of the Ascend Collection.

Based on November reports, the Holiday Inn Brooklyn Nevins Station (245 guestrooms) and Even Hotel Nevins Street (204 guestrooms) were the two largest by room count for the in-construction phase. Many of the new and upcoming hotels in Brooklyn are close to subway lines, providing easy access to Manhattan and, in many cases, airports.

Investment trends

A significant driver for development in Brooklyn is the overall lower cost of real estate. “That’s an attractive add-on for developers,” Freitag said. “The big-box, upper-upscale hotels are obviously normally geared toward meeting planners and trying to attract attendees,” he added. “That’s probably new for Brooklyn, or hasn’t been so prevalent as we’ve seen in Manhattan in the past.”

Limited-service hotels are a growing trend for development throughout all of New York City. “That said, New York is a place where an independent boutique property without access to a central reservation system can actually do quite well,” Freitag said. “The increases in supply we’ve seen in New York City are both limited-service and boutiques that could be high-end or mid-road with a more moderate price point.”

Not all investment is going into new properties. One of the borough’s largest hotels has seen sustained investment over nearly 20 years, and is in the process of another renovation: The New York Marriott at the Brooklyn Bridge opened in 1998, and was the first new-build hotel in the borough in more than 64 years at the time. In September 2006, the hotel expanded with an additional tower, 280 new guestrooms and meeting space. Today, the hotel has 667 guestrooms and is the largest branded hotel in the borough. This year, Marriott and its co-owners Muss Development and Home Fed will complete a $45-million renovation, which includes the entrance and lobby, The Bar, the M Club Lounge, all banquet/meeting rooms and all guestrooms.