The Brooklyn commercial/retail market rebounded significantly in 2024, marking the third-best year on record for the borough. A total of 81 transactions generated $641.5 million in sales, reflecting year-over-year increases of 19% and 48%, respectively. Approximately $480 million—75% of the total dollar volume—occurred in the year's second half, the strongest second half since 2019. This period saw 11 sales exceeding $10 million, an increase from just 3 in the first half of 2024. Institutional capital drove much of this activity, highlighted by Empire State Realty Trust's diversification into Brooklyn retail with the L3 Capital Commercial Portfolio in Williamsburg. The $143 million transaction, at $2,050 per square foot, exemplifies the growing demand for prime retail corridors. Tenants include Nike, Santander, Hermes, and Chanel, signaling confidence in Brooklyn's luxury retail landscape. Large-format retail centers remain stable amidst retail transformations. Gateway Center Mall in East New York secured a $300 million refinance loan to modernize its 607,483-SF hub, anchored by tenants like JCPenney and Target. Meanwhile, smaller and traditional retail stores face challenges from shifting consumer preferences, rising costs, and reduced foot traffic in non-core areas. Brooklyn's retail market concluded 2024 with an average price of $721 per square foot, a historic high and a significant rise from $632 in 2023. 2H'24 Featured Transaction Williamsburg L3 Capital Commercial Portfolio Amount: $143,000,000 $/SF: $2,050 Buyer: Empire State Realty Trust Seller: L3 Capital LLC Sale Date: 9/25/2024

The Brooklyn industrial and warehouse market had a remarkable 2024, rebounding after a slow 2023. With 111 transactions totaling over $1.1 billion, this represents increases of 28% in transaction volume and 59% in dollar volume compared to the prior year. The fourth quarter alone accounted for over $400 million in sales, marking the best quarter since Q2 2022. The highest price per square foot ever recorded in Brooklyn—$582/SF—was achieved in 2024, further illustrating the market's strength. A key transaction was ProLogis's acquisition of 410 Kingsland Ave from ExxonMobil for $120 million. Williamsburg led the borough with 20 transactions totaling $171 million, followed by Sunset Park with 16 deals totaling $135 million. Despite only 6 transactions, Red Hook saw the highest total dollar volume at $165.9 million. This was mainly driven by Terreno Realty Corporation's acquisition of 280 Richards Street—an Amazon-leased warehouse—from Thor Equities for $156,250,000. This exceptional performance in 2024 underscores the continued resilience and growth of Brooklyn's industrial market. High demand for last-mile logistics space remained a driving force, with major tenants like Amazon and UPS securing strategic leases, helping to further establish Brooklyn as an ideal destination for the industry. 2H'24 Featured Transaction Greenpoint 410 Kingsland Avenue Amount: $120,000,000 $/SF: $277 Buyer: ProLogis Seller: Exxonmobil 80 Sale Date: 12/26/2024

Brooklyn's development dollar volume saw a 10% year-over-year increase from 2023 to 2024, rising from $1.21 billion to $1.33 billion. The transactional volume also increased but only by 2%, from 134 transactions to 137. The introduction of the 485-X tax abatement in April has revitalized the rental development market, encouraging developers to get off the sidelines and submit bids on available sites. The average price per buildable square foot rose from $231 in the first half of 2024 to $257 by year-end. Despite this, the 485- X abatement poses some challenges, particularly for larger properties (100+ units) with higher prevailing wage requirements, prompting some developers to subdivide parcels to mitigate these obligations. While most of the sites that were purchased throughout Brooklyn will be developed into rental housing, we did see a significant uptick in a desire to produce affordable housing. In markets like Williamsburg where most of the transactions were sub-$10 million, we expect there to be more infill condominium development. Williamsburg continues to lead the Brooklyn development market, finishing the year with 26 transactions for $116 million, roughly $4.5 million per transaction. Three other neighborhoods—Downtown Brooklyn, Gowanus, and Greenpoint also surpassed $100 million in transactional volume. While the City of Yes has been generally well received, the market is still researching the nuances and considering their options. It is still too early to say what its impact on pricing will be. 2H'24 Featured Transaction Greenpoint 1 & 2 Oak Street Amount: $174,100,000 $/SF: $174 Buyer: TF Cornerstone Seller: Pearl Realty Management Sale Date: 7/31/2024

Bank Lenders Banks maintained a strategic focus on depository relationships to strengthen and optimize deposit, reserve, and liquidity ratios. There has been a noticeable shift in leadership as incumbent banks addressed or resolved legacy multifamily loan portfolios. Efforts have intensified in commercial, industrial, and bridge lending, with a reduced emphasis on multifamily term loans, particularly within the RS subasset class. Agency Lenders Agency lenders remained active in 2024, providing financing for market-rate, workforce, and affordable housing nationwide. However, recent market distress has prompted revised underwriting standards, emphasizing the physical condition of collateral and enhanced due diligence, particularly for older properties (pre-1970s multifamily) and assets in tertiary markets. Rate buy-downs enabled borrowers to secure financing below market rates, effectively increasing loan proceeds. CMBS Lenders The commercial mortgage-backed securities (CMBS) market sustained robust growth through the end of the year, driven by full-term interest-only payments and more flexible underwriting standards compared to FNMA and Freddie Mac. For multifamily assets, leverage reached up to 70% LTV at a 1.20x DSCR on interest-only payments, with a minimum 8.5% debt yield. Spreads have narrowed significantly. The 5-year product remains a preferred option for investors seeking shorter defeasance periods to minimize prepayment penalties. Debt Fund & Bridge Lenders Activity in the debt fund and bridge lending space increased significantly, bolstered by multiple Federal Reserve rate cuts and heightened scrutiny on regulated lenders. The narrowing rate gap between bridge and permanent financing, driven by falling short-term indexes (e.g., Prime, SOFR), has enhanced the appeal of bridge loans due to their higher proceeds, simplified underwriting processes, and prepayment flexibility. Preferred Equity & Mezzanine Debt Banks have adopted a highly selective approach to construction lending, prioritizing markets and sponsors with strong track records and established relationships. Bank construction loans are still available, with spreads starting at SOFR + 300 and underwriting increasingly focused on rental fallback scenarios. Many lenders view the current environment as an opportune time to support construction lending, particularly in supply-constrained markets where the development pipeline has significantly contracted. Non-bank debt funds have gained market share in the institutional $50M+ loan segment, as regulatory constraints limit depository institutions' exposure to HVCRE loans. Preferred Equity/Mezzanine Lenders Subordinate capital providers have exploded in relevance since the banking crisis and run-up in interest rates allowing for preferred equity and mezzanine debt investors to fill in the shortfall in the capital stack. Subordinate capital is available for both new acquisitions and recapitalizations for distressed opportunities. Senior lenders can often view a Preferred Equity or Mezzanine Lender as a "credit enhancement". furthering the likelihood that they consent to subordinate financing.

A number of macro-economic indicators affect the bottom line of commercial real estate investments in New York City and, in turn, the pricing and demand for these assets during any given period. Ariel Property Advisors' Research Division tracks national and local metrics to identify key market drivers influencing the real estate industry. A number of macro-economic indicators affect the bottom line of commercial real estate investments in New York City and, in turn, the pricing and demand for these assets during any given period. Ariel Property Advisors' Research Division tracks national and local metrics to identify key market drivers influencing the real estate industry.

Ariel Property Advisors has been a regular contributor for Forbes. Here is the list of the five latest articles. 12/17/2024: 'Yes' In My Backyard: NYC's Rezoning Ushers In New Era Of Housing Development Local lawmakers took a major step toward solving New York City's housing crisis by approving a rezoning initiative called the City of Yes for Housing Opportunity. 11/25/2024: One Million Reasons Rents Are High In New York City Rent regulations reduce the housing supply and push rents to new heights as newcomers, young people and others compete for NYC's 1.1 million free market apartments. 10/22/2024: New York City Office-To-Residential Conversions: Here's What We Know The sale of NYC office buildings suitable for conversion to housing accounted for approximately 25% of the $2.2 billion in development sales citywide in 1H 2024. 9/13/2024: New York City Transaction Volume Poised To Rise: Here's The Opportunity With mortgage maturities forcing sales, real estate prices falling and fresh capital entering the market, NYC is expecting a surge of trades at attractive prices. 8/7/2024: 3 Drivers Behind The Surge In New York City Investment Sales Three drivers contributed to a pickup in New York City investment sales in 1H 2024 resulting in $11.79 billion in trades, up 26% from 2H 2023.