NYC Hot Spot: Long Island City

In the extremely dense and extensive New York City commercial real estate market, it’s not a matter of if a certain neighborhood or area is gaining momentum, it’s simply a matter of where (and in which borough). For current and potential New York City investors, the future of Long Island City, Queens looks awfully bright.

The conversation surrounding the potential of Long Island City in the commercial real estate market has been lingering in recent years, but appears to be justified now more than ever. Developers and entrepreneurs have already set their sites on the Queens neighborhood, paving the way for current and future investors to capitalize on the seemingly set to flourish market.

When looking at the past decade of commercial real estate sales among Long Island City apartment buildings, along with the coming development plans of the neighborhood, there are a few distinct indicators of Long Island City’s potential CRE investment growth. Among those indicators are the city’s growing focus on tech, new and continued mixed-use waterfront development, and rising value of existing commercial assets.

“Making Tech Work for All”

As we’ve seen in many locations around the country, cities that buy heavily into tech and tech-educated populations tend to have flourishing commercial real estate markets.

The Western Queens Strategic Plan was laid out by the elected officials and leaders of Queens Borough. It outlines initiatives to make Queens a national tech harbor, to which Long Island City stands to benefit immensely. The plan is made up of six initiatives, to create a place where “tech employees want to live, work, and play,” including the development of 20,000 residential units and 3 million square feet of office space. It also includes tech-focused high schools, secondary institutions, and workforce training programs, as well as 57 acres of parks. The area is accessible via 13 subway stations and three ferry landings, and houses roughly 50 Citibike stations.

Property-based initiatives are to build Western Queens’ 1,900 acres of real estate as dense as possible as it relates to tech activity. For example, while Brooklyn’s Tech Triangle sits at only 1,000 acres, the area’s tech clout stems from its density of productive tech real estate assets within that space. By successfully filling the 1,900 acres in Queens with productive tech “nodes,” the commercial real estate market in Long Island City could see a boom similar to what Downtown Brooklyn has seen in recent years.

Amazon also recently named New York City as a potential destination for their elaborate HQ2 (without naming a specific neighborhood). The vast facelift of Western Queens’ tech scene could be a case of extremely convenient timing that could lead to Amazon’s HQ2 being placed in the area, which would undoubtedly impact the surrounding CRE market in an enormous way.

Waterfront Development

Mixed-use property and waterfront developments can also have a drastic effect on the economy and health of a given city, driving up the investment value of its property.

One of the developments already in the works in Long Island City is Hunter’s Point South – an elaborate and beautiful mixed-use property along the western waterfront of Queens. While phases 1 and 2 of the project have already unrolled, there are still advancements to be made going forward.

Phase 1 opened in 2013, and includes more than 900 affordable housing units, as well as 20,000 square feet of retail space. Phase 2, which just opened in June of 2018, spans about 5.5 acres of land. The total park now sits at roughly 11 acres of waterfront land, and includes housing, retail spaces, as well as a bevy of outdoor activities such as bicycle paths and a kayak launch.

Upon the conclusion of Hunter’s Point South, the park is set to include up to 5,000 residential units, as well as a 600-seat elementary school, retail stores, and outdoor parks and activities along 30 acres of waterfront property.

Rising Asset Value

As tech-focused plans have been laid out and Hunter’s Point South expands, Long Island City stands to become a much more preferable living destination for New York City residents. In fact, residential property assets are already gaining significant value for investors, seeing steep increases in the the last three years.

The average sale price of a walk-up apartment building in Long Island City saw a steady increase throughout the early 2000s, but in the last four to five years, has increased much more dramatically. The most dramatic jump took place from 2015 to 2016, when the average price increased roughly 46%, from 1.5m to 2.2m. The city’s rise in potential appears to be sustainable, however, as the average price has since continued to rise, currently sitting at 2.69m thus far in 2018.

Looking at elevator apartment sales helps shine a light on the overall area’s development as well. The total number of elevator apartment buildings sold in Long Island City from 2008 to 2010 was just 13. That rose sharply as investors began entering the market, and in the next five years, from 2011 to 2015, the area saw a total of 93 sales. 2013 saw the highest number of elevator apartment sales, with 32 in total.

Directly following the uptick in the number of sales was a noticeable hike in the average sale price for elevator apartment buildings in Long Island City, as the average sale price rose from 6.9m in 2011 to 19.7m in 2015.

The number of sales tailed off after 2015 (a possible sign that there may not be much left on the market), but the general rise in value of apartment buildings bodes well for the potential value of other asset classes, as well. For example, despite there being only two elevator apartment building sales in 2016, the year did see a $70 million sale of a Crescent Street apartment building near Hunter’s Point South that was purchased (and presumably developed) for $19 million just three and a half years prior, in December of 2012.

The properties near Hunter’s Point South and the assumed tech-nodes to come could see intense increases in value going forward, regardless of asset class. Property types like retail, multifamily, and mixed-use could see a similar boost in value to that of the Crescent Street apartment building.

So, while early apartment building investment opportunities may be coming to a close, the future of the overall CRE market in Long Island City looms very bright – especially when considering the upgrades yet to come – each of which, on their own, make for great reason to buy into Long Island City. Bringing them together, however, makes the outlook even more impressive for the neighborhood and those already invested, and signify the need for prospective investors to keep a firm eye on the market going forward.

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