What makes commercial real estate in Brooklyn attractive?

How policy and vision created 3 million square feet of commercial and residential space in DUMBO

Brooklyn’s renaissance didn’t happen by accident. A crucial seed was planted by David Walentas when his company, Two Trees, purchased a cluster of aging warehouses in DUMBO in the 1970s. After rezoning the area, the company successfully repurposed its portfolio to include more than 3 million square feet of commercial and residential space, across 12 buildings, to create a thriving 24-hour community with access to an 85-acre riverfront park.

In a recent one panel discussion Presented by Ariel Property Advisors and Cozen O’Connor, Alyssa Zahler, Managing Director at Two Trees, described how her company applied the DUMBO redevelopment strategy to Williamsburg, which was rezoned in 2005. Two Trees acquired the 19th century Domino Sugar Factory site in 2012 and transformed it into The Refinery – 460,000 RSF of offices, retail and open space. A larger mixed-use waterfront campus with offices, retail, rental housing and apartments has been completed or is under construction at five additional contiguous locations.

Today, Two Trees’ office tenants in Brooklyn are largely technology and creative companies, with 40% of new leases in the Williamsburg portfolio in the AI ​​or an AI-adjacent space. Two Trees’ vertically integrated model keeps construction and management in-house, allowing for high-end, pre-built spaces that rent in the mid-$40s per square foot in DUMBO, and pre-built spaces in Williamsburg that rent for $65 to $78 per square foot.

Ten years ago, Zahler said she needed to “sell Brooklyn” by highlighting its transit and lifestyle benefits. Not anymore. “People want to be here,” she said. “People want to live here.” Approximately 80% of the decision makers who rent space in Two Trees office buildings in DUMBO and Williamsburg already live in the area.

A market in Brooklyn that is growing enormously

Brooklyn’s foundations reflect the demand for housing. Average market rents rose by 6.9% year-on-year in October $3,850and the average sales price in the third quarter of 2025 was reached $1.05 million– an increase of 7.7% from the previous year, according to reports prepared by Miller Samuel Real Estate Appraisers & Consultants for Douglas Elliman.

Investment sales have followed that trend. In the third quarter of 2025, Brooklyn saw $4.92 billion in transactions across 706 deals, according to research from Ariel Property Advisors. Multifamily sales increased 22% to $2.8 billion in the first and third quarters of 2025 compared to the same period last year.

Development site sales increased 10% year-over-year to $1.14 billion in the first nine months of 2025. The momentum in the development sector is the result of a political shift, says Ariel Partner Sean Kelly, Esq. “Ten to 12 years ago, NIMBY was everything and the politicians agreed with it,” he said. “In the last five or six years we have seen a big change. Now everyone is in favor of development.”

Kenneth Fisher, Esq., member Cozen O’Connor, credited Gowanus’ rezoning and a broader recognition among policymakers that construction is the only way to address the housing crisis.

Rybak development: building for the middle market

Sergey Rybak, principal and founder of Rybak Development, capitalized on Brooklyn’s development boom and oversaw the completion or development of more than 1,600 housing units throughout the city, including more than 1,100 in South Brooklyn, Gowanus and Williamsburg. Its vertically integrated business includes development, construction, management and managed retail spaces that serve as amenities for building occupants.

The New York City Economic Development Corporation recently awarded Rybak Development a contract to build an 800,000-square-foot, all-electric mixed-use project in Coney Island with 505 apartments (383 market-rate and 122 affordable) plus amenities, retail, parking and community space. He estimates the project will employ 300 people a day for at least two years.

Rybak focuses on middle-income renters and attributes its success to efficiency. “We do our own construction, we do our own management, we do our own development,” he said.

While he builds rental properties, he believes policymakers should also encourage homeownership to help working families build wealth — an opportunity that diminished after the expiration of the 421a tax credit for apartment development.

Big bets on Brooklyn Heights

Ian Ross, founder and principal of SomeraRoad, an opportunistic real estate investment and development firm headquartered between New York City and Nashville, has bet big on the luxury apartment market in Brooklyn. In May 2025, his company acquired the historic Hotel Bossert at the corner of Montague and Hicks streets in Brooklyn Heights, bringing long-awaited new life to a building that had been vacant for more than a decade.

“I have walked past the Hotel Bossert for the past decade and looked up at what is without a doubt the most important and iconic building in this neighborhood and perhaps one of the most important buildings in the neighborhood,” Ross said.

Ross said his company is restoring and revitalizing the 116-year-old, 14-story Italian Renaissance Revival-style landmark into luxury branded apartments with world-class amenities and service.

Once known as the Waldorf-Astoria of Brooklyn, Hotel Bossert famously hosted the Brooklyn Dodgers’ 1955 World Series celebration and countless other events over the years. In 1983 it was sold to the Jehovah’s Witnesses. It later passed to investors whose development plans stalled, and the property was eventually sold at auction.

Ross is optimistic about New York City’s long-term strength. “The talent, the culture, the demand: it’s unparalleled.”

A story of two markets: the free market flourishes, the regulated stock market battle

While free market development is booming, rent-stabilized housing is in crisis. Since the introduction of the HSTPA in 2019, stabilized buildings have traded at an average of 50% discount, with recent sales discounted at an average of 65%, and 14% are in pre-foreclosure or foreclosure, according to Leon Goldenberg, CEO of Goldmont Realty.

A New York Apartment Association study found that about half of pre-1974 stabilized buildings would go bankrupt if rents were frozen for four years at the proposal of newly elected mayor Mamdani. About 47% of the city’s nearly 1 million stabilized apartments are in buildings that are 100% or nearly 100% stabilized. An estimated 5,000 buildings with more than 200,000 units are already in serious distress, most of them in the Bronx and Northern Manhattan.

Operating costs have soared: Utilities are up 31%, maintenance is up 39% and insurance is up 150%, according to one NYU Furman Center Analysis of Rental Guidelines Management Data. Goldenberg noted that his insurance has increased from $500 to $1,550 per unit in the past decade.

Meanwhile, regulated rents remain too low to finance essential repairs. Goldenberg said the average rent for his apartments is $1,386, for which he pays all costs, including taxes, water and sewer, insurance and sometimes a mortgage, which have risen faster than inflation.

He gave an example of two stabilized units in Bushwick that are vacant because their rents of $577 and $612 are too low to justify the renovations needed to rerent them and incur additional costs of $115 for water and $75 for repairs.

Public housing NYCHA, on the other hand, collects roughly $2,000 per unit (with tenants paying about $500-$590) while paying no taxes, water, sewer, insurance or mortgage – but still faces a Capital shortfall of $78 billion and can’t keep up with repairs, Goldenberg said.

Goldenberg advocates for solutions, specifically implementing a new tax class for buildings with more than 75% stabilized units, revising the J-51 tax incentive program to better support capital improvements and reducing insurance costs.

He also said the Housing Court needs to become more efficient because collections have dropped from 96% to 90% since COVID and are still falling. Evictions now take at least 15 to 18 months, while most of them last two years. Legal fees now exceed 10% in situations where the city pays the arrears to keep the tenant in place, due to the recurring need for court hearings.

The bottom line

Brooklyn’s free market boom is real, driven by policy support, private vision, and overwhelming renter demand. But the regulated side of the market is unraveling. More than 200,000 stabilized apartments are in financial distress, creating a widening gap between growth corridors and rent-regulated inventory.

For now, Brooklyn’s story is a tale of two markets: one thriving on flexibility and investment, the other limited by regulation and rising costs.

The content of this article comes from the State of the Brooklyn Real Estate Market: What’s Ahead? networking breakfast and panel presented by Ariel Property Advisors and Cozen O’Connor on November 13, 2025 at the Brooklyn Public Library’s Center for Brooklyn History. Click to watch a video of the panel discussion here.