Transit has the potential to drastically change the landscape of real estate in any given area of the US.
But in an already saturated market like New York, we wanted to explore just how much prices would be affected by a change in transit accessibility.
As it turns out, even markets like New York can be deeply changed by just 3 subway stops…
The Second Ave Subway/Q Line Extension
The Q line runs east from 57th Street and 7th Avenue across to 63rd Street and Lexington Avenue.
The Second Avenue Subway line is an extension of the Q line, making its debut at 72nd and Second Ave, with additional stops at 86th St. and 96th St., all serviceable by brand new subway stations.
This extension only represents Phase I of the project. It opened in the beginning of 2017.
Three additional phases are scheduled for the future (including 13 additional stops in total), though those phases are currently unforeseeable due to budget issues.
When looking at how transit traditionally effects commercial property values in the surrounding area, values typically rise.
The Upper East Side was an area with limited public transit accessibility compared to other areas in Manhattan, with overcrowding on the 4, 5, and 6 trains being the highest in the city.
Before the opening of the new Q Line extension, during morning rush hour, there was an average of 133 riders per downtown train left stranded on the platform at the 77th street station.
As many as 506 passengers have been left stranded by a single train at the 77th Street station…
The expansion of the Q was meant to lessen the load of the 4, 5, and 6 trains as well as provide more accessibility to the residents further east on the Upper East Side.
Q Line Impact on Commercial Real Estate
By diving through Reonomy data, we wanted to determine how the Q line expansion has affected the surrounding property values in Manhattan’s Upper East Side since being announced and opening.
If we look at the total number of commercial sales from 72nd St. to 96th St., along 1st, 2nd and 3rd avenues, we can see that there’s been a steady increase in average and median sales amount since the opening of the Second Ave Subway.
Not only did sales increase along with the opening of the line, the valuation of the entire area increased exponentially.
While 3rd avenue was already fairly accessible from public transit due to the 4-5-6, the expansion of the Q line will most certainly make the commuting options easier and the area more accessible in general.
Accessibility tends to encourage more businesses, people and shops to flock to an area.
Walkability is one of the largest factors for people living in New York City. Increasing the walkability of an area directly increases the value of the businesses, and therefore, the real estate within it.
While the subway may expand, it’s important to also make people want to go there.
While a large population of people already live in the area most affected by the new subway stops, much of what was previously inaccessible for commuters is opening itself up for potential development, and encouraging non-residents to frequent the area.
But, in New York, a subway doesn’t make or break an area.
The Lower East Side has been fairly inaccessible by transit for a long time. People still decide to live and work there, and bars, restaurants and shops have changed the area to adapt to the young people that moved there.
Younger residents have been moving to the Upper East Side over the last few years because it has more affordable housing than many other neighborhoods in Manhattan.
The retail space has been responding to that, as well as multifamily.
The increased accessibility can only do more to increase the value of the area, however. While it’s clear that real estate prices are quickly rising and the subway is already bringing a renewed interest in the neighborhood, it remains to be seen just how much the area will change.
Second Avenue Subway Project Time-Lapse
The Second Avenue Subway has been part of the city’s transit plans since the 1920s.
An attempt to begin construction was abandoned due to the financial crisis of the 1970s and only a few tunnel segments were built.
Over the years, plans were scaled down, and its length was trimmed to only three stops on the Upper East Side.
When ground broke in 2007, Phase One was scheduled to open and operate by the end of 2013. In 2011, that deadline was pushed back to 2016.
The Q line extension ended up opening in January 2017.
In the year and a half since opening, there has been more of a decrease in the count of property sales and investments.
Though part of the proposed plan brings the subway to upper Manhattan, the prospect for future phases remains unknown because of budgetary issues.
The initial spike in the price of sales began in 2011, and continued to grow through the opening of the project.
The spike in the sheer number of investments also occurred around the expected opening of the subway. This investment increase helps to create context around the decline of sales in the past year and a half.
From 2011-2016, median rent surrounding Second Avenue appreciated by 27%—almost double that of Third Avenue (14%), and significantly more than First Avenue (19%).
According to research by StreetEasy, this acceleration in rent appreciation is closing the price gap between all three avenues.
Third Avenue is still the most expensive, with a median rent of $2,873 as of 2017, but First Avenue ($2,554) and Second Avenue ($2,520) are not far behind.
Rent appreciation for renters surrounding the new 72nd Street station and the 96th Street station could be subjected to an increase of $462 per month, based on a commute time decrease of 14 minutes to Midtown Manhattan.
Those near the 86th Street station may have had a median rent increase of $330 per month, corresponding with a 10-minute decrease in commute time.
In terms of commercial sales, we reviewed Reonomy data to see if the building sales correspond with the rent rise, and found that there has been a distinct increase in property values within the 3 avenue radius.
Around the expected opening in 2011, prices began to rise.
Since 2011, there has been a 185% increase in Median Sales amount for Multifamily properties.
For the 10 years prior, median sales amount stayed nearly the same—around 3.3M. Over the past 3 years, that median has jumped to around 10M.
Mixed Use and Retail saw a similar jump in median sales amount.
And while the number of overall commercial sales did not follow the same upward trend, the sale amounts did.
After a huge initial spike in sales amount in 2014, the median sales amount has stayed far above where it had been in the past.
There was a 346% increase in median sale amount from 2011 compared to sales in 2015.
So all in all, while the evidence isn’t indisputable, the numbers definitely show an impact from the Second Avenue Subway extension through the Upper East Side.
Now, it’s on you to figure out whether or not you’d like to invest or not!
Looking to find properties in the next up-and-coming area? Utilize the Reonomy Platform to identify markets of interest and prospect for your next high return investment.