Daniel Wechsler, Ariel Property AdvisorsIt’s no surprise that New York City has experienced a dramatic rise in both multifamily property prices and residential rental rates, which are respectively up 90% and up 30% since 2011 for landlords and tenants alike.
Residents continually search for the next up-and-coming value neighborhood in which they will be offered better living amenities at a more affordable price.
This prospect of neighborhood value is becoming increasingly evident along the Queens bound 7 train. Notably, the spotlight is starting to shine on neighborhoods such as Sunnyside, Woodside, Elmhurst, Jackson Heights, Corona, as well as Flushing and we expect this trend to become more pronounced in the coming years.
Just as the Brooklyn-bound L train shifted the boundaries of “cool” from Williamsburg to Bushwick, the 7 line can do the same for Queens. Since 2011 ridership is up by 42% at the Vernon Blvd./Jackson Ave. station, contributing to the 18% overall growth in ridership at all Long Island City 7-line stations in the same period, according to Ariel Property Advisors’ recently released Neighborhood Report on the Queens bound 7 train.
The 7 train subway line offers local and express service between Main St. in Flushing, Queens and 34th St. – Hudson Yards in Chelsea, Manhattan. Average weekday ridership includes 525,000 commuters, according to the MTA. Also, the market appears to be pricing in potential gains in the neighborhoods along the 7 line. Excluding Long Island City, the area’s average price per s/f is up 51% since 2011, recently hitting $251 per s/f.
Similar to Brooklyn, when we think about Queens today, this area is benefiting from outsized price appreciation and borough-changing developments at a very rapid pace during the current boom. Many pinpoint Brooklyn’s ascension to 2010 when Google bought 111 8th Ave. in Manhattan for $1.8 billion, which led many tech employees to live along the directly connected L-train. Competitors and collaborators, seeking proximity to the tech behemoth followed suit and accelerated Midtown South’s growth into Silicon Alley.
Similarly, Williamsburg and Long Island City were both rezoned in the early 2000’s allowing for the eventual repurposing of many under-utilized and industrial sites that had historically defined these areas.
The effect of these rezoning initiatives and capitalization of land-use changes taking shape as the recession hit, are now largely seen in the 2010-16 real estate cycle. As such, Williamsburg began to fully develop and subsequently price-out existing residents just as those very residents were most desired by the new industries developing across the water. Still requiring the L to get to and from work, residents slowly began moving eastward and developers followed.
Similar to how Williamsburg’s growth trickled east to East Williamsburg and then to Bushwick, we are beginning to see Long Island City’s development flow eastward. Weekday ridership on the L is up nearly 100% since 1998, and an even more astounding 250% at its most popular station, Bedford Ave., according to senator Schumer’s January announcement. Last year alone, rents jumped 19% surrounding Williamsburg’s Lorimer Ave. station and another 9% at the Myrtle/Wyckoff station in Bushwick, notes StreetEasy.
Though less publicized, a similar trend has started to play out in Queens. In 2015, Straphangers Campaign ranked the 7-train as first in its overall “MetroCard Rating” for the second year in a row. Furthermore, the 7 line had the most scheduled service, with two-and-a-half minute intervals between trains during the morning rush hour.
Average rent gradually declines moving east along the 7-line as a neighborhood’s distance to Manhattan grows. In Long Island City average rent for a 2-bedroom is $2,905 and rising. As Long Island City continues to mature this will likely push residents further into Queens in search of less expensive housing. Riders may potentially begin to tack on an additional two minutes to their commute time in exchange for 20% lower rents in Sunnyside where average rent for a 2-bedroom apartment is $2,287, or another three minutes to Woodside and so on.
If these neighboring locations experience even half of the ridership growth Long Island City has seen, rental rates and property values are in for a meaningful bump.
Today, the remaining six Queens neighborhoods along the 7 line are all roughly half the average Manhattan rent levels, and between 12.5%-25% less than rents seen in Long Island City.
With the infrastructure already in place, we believe that these neighborhoods are ready to absorb additional residents migrating to the area and the existing value gap to narrow in the near future.
For the full Neighborhood Report on the Queens bound 7 Train please see: http://arielpa.nyc/investor-relations/research-reports
Daniel Wechsler is vice president at Ariel Property Advisors, New York, N.Y.