The Flight-to-Quality has Yet to Benefit the Redeveloped Domino Sugar Refinery
A year after completing the redevelopment of the historic former Domino Sugar Refinery into a high-end, state-of-the-art office building, the 450,000-square-foot structure built inside the factory’s former façade is only about a quarter leased. In October 2023 high-end fitness chain Equinox leased 42,000 square feet— the first signing at the landmarked building since its reopening. Two Trees, a Brooklyn-based family company founded in 1968, acquired the 11-acre factory site for $185 million in 2012; and since then, has spent $2.5 billion to redevelop the Williamsburg waterfront site that now hosts three residential buildings, one condominium tower, another smaller office building, an outdoor amphitheater, some retail, and a 5-acre public waterfront park. The historic landmarked refinery is the centerpiece of the mixed-use complex and was constructed from the inside out, with pin oak trees filling the 15-foot gap between the old walls of the existing structure and the new, all-electric building. Efforts to secure office tenants in the wake of the pandemic has been described by Two Trees’ Chief Executive of Management, Jed Walentas as “wildly challenging,” acknowledging that the mix of startups currently making up the roster of office tenants “could go ‘poof’ tomorrow.
Many developers anticipated that the “seemingly insatiable demand for office space” by technology companies that occurred after the pandemic hit would continue, prompting developers in places such as Brooklyn, the West Midtown Section of Atlanta, and the RiNo neighborhood of Denver to push forward with office construction on speculation. However, in subsequent years there was a reversal of leasing activity as technology and other companies downsized their office space, and “many of those buildings are still waiting for tenants.” Among those companies that have signed new leases, it’s for space close to traditional markets where landlords are offering months of rent concessions and other incentives. Walentas’ confidence has waned of the possibility of leasing the entire building to a high-profile tech company, or that “large companies weary Manhattan’s expensive office market” would be eager to relocate and “get closer to Brooklyn’s robust pool of highly skilled workers.” Although Walentas no longer “believes a large corporation will move its Manhattan headquarters to Brooklyn, especially if the CEO doesn’t live there” and its employees would need to commute from the Tri-state area, he does “believe a Fortune 500 company based in Manhattan will eventually open a satellite office in Brooklyn,” making the economics work out in the long term.