Industry City: A Poster Child for Gentrification or Innovation?

The tour had just begun, but the children could not wait to snap a photo with Oompa Loompa outside Li-Lac Chocolates, a new 10,000-square-foot retail store in Industry City. Behind the giant wraparound window, employees were putting together a 21-inches tall chocolate Santa, ready for those who want a conversation piece for Christmas.

As tasty as the nabe seemed, Tamara Zahaykevich has a lot to say why she’s not impressed.

“Industry City is gearing toward tenants with cache,” said the 44-year-old artist, who has been renting a studio in one of the complex’s 16 buildings before private investors and elected officials eyed it as a prime redevelopment site. “They tout artisanal and creativity, but they don’t care about small businesses and the community here.”

Ms. Zahaykevich is among the fleet of creative class that were priced out of Industry City, a 6.5 million-square-foot complex in Sunset Park, Brooklyn. She said she was renting a 300 square feet space for three years and paying $2 per square foot to NARS Foundation, which was subletting its space to 50 artists since 2006.

By March 2013, the foundation started to negotiate with the longtime building owners, Cammeby’s International and FBE Limited, a few months before its 7-year lease is running out. The foundation was offered a one year extension with double the rent, said Junho Lee, director of NARS Foundation. But as months pass by, the building owners wanted to renew the deal on a monthly basis.

“With our high expense, it is not worth it to renew such a short lease,” said Mr. Lee, who was paying $8 per square foot prior to the lease renewal. The foundation’s space is now occupied by The Brooklyn Rail, an arts journal and exhibition curator.

Change accelerated when Jamestown Properties, the developer behind Chelsea Market, partnered with Belvedere Capital and Angelo Gordon and pushed for a $1 billion plan to revamp the dilapidated row of loading docks, formerly known as the Bush Terminal. The investors have acquired roughly 50 percent stake in the building in September 2013, as per the company’s press release.

In the meantime, eight of the artists reached out an Industry City representative in an effort to preserve their studios. They were told that there are spaces available in the less well-maintained buildings near the waterfront, though there were no concrete offers, Ms. Zahaykevich said.

“We wanted to have a floor built for us as a group but they declined, and only wanted to talk to us individually,” Ms. Zahaykevich said. “They’re interested in our status too, whether we’re backed by hip, cool galleries.”

So the group of artists reached out to Sara Gonzalez, who then represented Sunset Park among other neighborhoods in the New York City Council. She was sympathetic but didn’t offer any solutions, as getting special set asides for artists is prone to tension, Ms. Zahaykevich said.

The real industry poured nearly $7 million on city council races in 2013, of which Jamestown Properties made a $250,000 PAC donation, according to nonprofit Common Cause New York. Carlos Menchaca, who unseated Ms. Gonzalez, is a supporter of Industry City’s Innovation Lab, an on-site jobs center.

Aside from significant funding, Mr. Menchaca vowed to keep Sunset Park’s community whole, and to ensure that the city council has the oversight and resources available to combat gentrification and displacement.

“Our residents need access to programs that give them the relevant skills to meet the new wave of jobs… and the Innovation Lab has the potential to do just that,” Mr. Menchaca said in prepared remarks. Mr. Lee said he had repeatedly tried to reach the councilman but to no avail.

While city officials say they are watchful of Industry City’s local hiring rate, questions have emerged as they access the immediate and long-term impacts to the community: if someone relocated to Sunset Park to work for Industry City, is that hiring or is that gentrification? If someone who lives in Park Slope goes down the R train for three stops to work at Sunset Park, is that considered local?

“It’s of course illegal to set a neighborhood-specific hiring policy, so often you have to infer a sampling and extrapolate what you understand from those circumstances,” said David Estrada, Mr. Menchaca’s chief of staff. “So even something as simple as local hiring rate in Industry City leads to complicated answers.”

Industry City is already home to small-scale manufacturers such as Li-Lac Chocolate and 3D printing company MakerBot, which is consistent with Mayor Bill de Blasio’s call to boost the city’s flagging manufacturing hubs.

More than 250 companies have inked leases at Industry City thus far, which totals 2 million square feet of space, according to a press release. A slate of companies are ditching their Manhattan offices and moving into the new, open spaces with high ceilings, including Time Inc. and the New York University Langone Medical Center.

“Industry City is about building a community,” said Joseph Cirone of Cushman & Wakefield, who negotiated the Makerbot and NYU deals on behalf of the landlord. “They’re bringing hundred of jobs, food producers to the neighborhood and turning a dead storage space to a creative tenant base,” Mr. Cirone said, adding that average rent range jumped from $7 to $12, to $20 to $30 per square feet overtime.

To be sure, local visitors and artisanal vendors are flocking to the 50,000-square-foot indoor Smogasburg and Brooklyn Flea, a wildly popular weekend attraction that usually takes place in the outdoors.

Bill Fletcher, who runs Fletcher’s Brooklyn BBQ 20 blocks away, is part of the 100 vendors that secured a spot in Smogasburg.

“It’s encouraging to see so many people here,” said Mr. Fletcher, adding that the booth serves at least 400 visitors in the weekend. Even though he has secured a 20-year lease for his brick-and-mortar restaurant, which generates less receipts but higher total spending per customer, he said he is trying to get a retail space with a kitchen in Industry City.

“Ten years from now, this neighborhood will become another Dumbo,” he said.

For Yuri Hernandez, Industry City was unheard of before she became a part time employee at Vendome Macaron Bar in Smogasburg.

“I used to come to Sunset Park only for Costco and there were lots of gangs around,” said Ms. Hernandez, who lives in the Kensington section of Brooklyn. “Now I feel more secure with new businesses and non-hispanic people.”

In a recent survey, developers found that nearly half of the employees at Industry City live in Sunset Park, Bay Ridge and Red Hook. Nearly half of the workers are Black, Hispanic and Latino or Asian, and 43 percent of the workers have less than a bachelor’s degree, the company’s spokeswoman said. That corresponds to the city’s profile of Sunset Park as a predominantly Latino and Asian neighborhood, of which only 29 percent of the adults have college degrees.

Industry City is expected to generate 20,000 jobs with a local hiring initiative, and have added 2,000 jobs in the past two years, according to a press release.

Jamestown have voiced their interests in a zoning amendment to allow the building of two large hotels, college dorms and more retail space, as the waterfront area is largely a M zone (meaning it’s reserved for manufacturing uses).

“The vast majority of projected 13,000 on-site jobs would be innovation economy jobs,” a spokeswoman for Industry City said. “According to labor market data, entry-level innovation economy employees are paid 57% higher wages than their entry-level service-sector counterparts.”

In 2006, the city established 16 industrial business zones (IBZs) within M zones to boost industrial businesses growth with assistance ranging from tax credits to upgraded wireless networks. Hotels have been permitted as-of-right in light manufacturing zones which often rolls on top of trendy neighborhoods such as Williamsburg and Long Island City.

While Jamestown has yet to file an application to the Department of City Planning, local community members are skeptical of whether the redevelopment project would spur good-paying local jobs.

Tony Giordano, who led a local community group named Sunset Parker, said Industry City had no real concern in preserving the local community.

Businesses like bakeries, chocolate makers and 3D copying, usually come here with already a full staff, Mr. Giordano said. “Hotels and dorms provide the lowest pay jobs– all in housekeeping.”

“You have to be careful of mission creep around these redevelopment projects,” said Kelly Anderson, a professor at Hunters College who created documentary on Brooklyn’s gentrification, My Brooklyn, with Allison Lirish Dean. “I’m not even sure if hotel is a great idea… there is already a displacement in the manufacturing sector.”

And the city is taking notice. The mayor’s office and City Council recently announced that they would restrict new hotels in light manufacturing areas through a new special permit– arguing that the hospitality sector is less jobs intensive and would crowd out manufacturers amidst skyrocketing rent. As part of a 10-year capital plan, the city will invest $34 million in infrastructure investment to support new and existing jobs in Sunset Park.

“There is a big market pressure moving through Sunset Park’s M zones and it’s our job to preserve the manufacturing industry and character of the neighborhood,” Mr. Estrada said. “Developers who filed uniform land requests will have have to abide to complex zoning rules and that’ll be a matter of negotiation.”