Daniel Wechsler, Ariel Property AdvisorsLong Island City is not the next “it” neighborhood–it has arrived. No longer is it necessary to clarify that it’s in Queens, not Long Island. With its waterfront parks with picturesque views of the Manhattan skyline (I highly recommend sunset cocktails at the Z Hotel roof bar), world class cultural institutions like MOMA PS1, The Museum of the Moving Image and the Noguchi Museum, many outstanding restaurants and an abundance of transportation, word has gotten out that Long Island City is a premier New York neighborhood for the working class, millennials and families alike.
With 23,500 rental units in the pipeline, much attention is rightly being paid to Long Island City’s emerging residential developments. The skyline is going to be drastically different in the not too distant future. Property Markets Group is planning a 77-story tower behind the Clock Tower building in Queens Plaza and developer Chris Xu has filed plans for a 79-story tower just north of Court Sq. to name just two. While there has been much talk of a softening in land prices throughout New York City we at Ariel Property Advisors, as evidenced by our marketing of two development sites at 45-34 Pearson St. and 35-02 Northern Blvd., have not seen this effect just yet.
In addition to all the housing being built, Long Island City is rapidly becoming an office destination as well. In the past year, several renowned companies have announced plans to relocate within Long Island City. Polo Ralph Lauren has plans for a 19,000 s/f office, Macy’s has plans for 145,000 s/f, Uber has plans for another 20,000 s/f and WeWork also has 60,000 s/f coming to market in Long Island City. They are joining long time businesses like Brooks Brothers, Jet Blue, Silvercup Studios, Citigroup, The Jim Henson Co. and Kaufman Astoria Studios.
The Long Island City office market is being driven by multiple factors. The first is rental discounts compared to Manhattan and Brooklyn. Average office asking rents at the end of 2015 were $35 per s/f compared to Midtown Manhattan at $71 per s/f and Downtown Brooklyn at $52 per s/f.
A second is the abundance of transportation providing an easy, direct commute for the workforce from all across the tri-state region. There are eight subway lines and a Long Island Rail Road stop which provide direct access to Queens, Brooklyn, Manhattan and Long Island. This could be further strengthened if recently announced Streetcar Line connecting Brooklyn and Queens materializes. Expected spillover from the highly anticipated Cornell Tech campus on Roosevelt Island is another main driver. The campus is being built with the purpose of increasing entrepreneurship and job growth in the city’s technology sector. The first phase, scheduled for completion in 2017, will include 800,000 s/f and 300 students. At full build, there will be two million s/f constructed on 12 acres serving an academic community of nearly 2,500. The majority of the spillover is more likely headed towards Queens than Manhattan.
The appetite for office product is drawing investors small and large alike. Ariel Property Advisors recently closed on a transaction at 10-09 49th Ave., a three story, 7,950 s/f office building for $3.875 million or $487 per s/f.
Many institutional level landlords are investing major capital as well. For the most part they are buying older industrial buildings and repositioning them into modern, amenity laced buildings in anticipation of the demands of TAMI (Technology, Advertising, Media, Information) tenants. This trend is highlighted by Related’s purchase of the Blanchard Building on Borden Ave. for $62.5 million and 21-02 49th Ave. for $47.5 million, Atlas Capital’s continued investment in Long Island City with the purchase of the Fresh Direct factory for $48 million, Vornado’s purchase of the Center Building on Northern Blvd. for $142 million and the recently announced sale of the 656,000 s/f property at 23-02 49th Ave. to Westbrook Partners for $195 million.
In addition, the borough’s first new ground-up office developments in decades are being planned in Long Island City. Tishman Speyer is planning a 1 million s/f office at 2 Gotham Center anchored by a second Queens WeWork location encompassing 258,000 s/f and Alma Realty has filed plans at 30-20 Northern Blvd. for a 10-story, 315,000 s/f office building with retail at the base.
While most of the attention is being paid to Long Island City and Astoria, investors would be wise to look further east into Queens. In 2015 we saw significant increase in activity in neighborhoods like Elmhurst and Corona complementing the continued maturation of Flushing and Jamaica.
Our near term outlook for the entire Queens market remains positive. Investors and developers are focusing much of their efforts on acquiring transit accessible assets that provide affordable alternatives to Manhattan and take advantage of Queens’ strong middle-class economic base. Rising market rents and steady growth in condominium prices continue to support Queens evolution into a premier destination for business, residential development, and capital investment.
Daniel Wechsler is a vice president at Ariel Property Advisors, Queens, N.Y.
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