Long Island City: Real(i)ty Check
In prior pieces I have been both an outspoken supporter of Long Island City (LIC) in the intermediate and long-term, and also a skeptic with regard to the significant supply of condo product coming to market in the near term. See my piece Spotlight Long Island City for a background. Today I want to revisit Long Island City, with the help of some input from a couple of local brokers and sources who are better informed and closer to the market than I am.
The press and blogosphere have been rampant with rumors of condos gone rental. According to an article in the Real Deal, "Developers become landlords, not by choice" one unfinished project, 512 Lofts at 5-12 51st Avenue, has gone partially rental. My pal Michael Stoler wrote recently in the NY Sun that:
One senior development director told me, Sales have dried up in Long Island City even for products in the best locations. Since October, we have only sold five units."
Other scuttlebutt suggested that even some of the most successful projects in LIC might be seeing some slowdown. According to Curbed, Toll Bros. 5SL had a one week sale on a particular unit, with a 3.4% price cut, followed by price reductions on 15 of 22 active listings. This was supposedly followed by prices being raised back up to prior levels as demonstrated by data from Street Easy. I have heard the Powerhouse mentioned as one property which appeared to have backed off from some higher than average prices, albeit for larger than normal apartments.
When I spoke with Eric Benaim of Nest Seekers, the only guy from a New York City real estate brokerage to open an LIC office, he offered a sunnier outlook and some explanation for the "gone rental" rumors. Eric has been a broker for 6 1/2 years, he's a Queens native, lives in LIC and has been dedicated to the market for the last 2 years. He opened up the LIC office for Nest Seekers a year ago on Vernon Boulevard. According to Eric, "People are taking a little more time to buy, but prices just won't go down." Condominiums like 44-27 Purvis street are having strong interest, with 20 - 30 people showing up to open houses on Sundays. The confusion over condo projects going rental may be being caused by rental availability in certain condo developments. For example, Eric reckons that 10% of the buyers at Arris Lofts, where he lives, were investors. These investors have since rented out their units....the developer has not gone rental. While the 20 or so units out of 237 units and 17 artist lofts that have rented may have generated some chatter, the magnitude of rentals is pretty small, and in part may also be indicative of the long waits owners had for the property to be built. According to Eric, at least one couple who were early buyers had twins while they were waiting for their unit to be delivered and put it up for rental, while they look for more appropriate space.
Darleen Krimetz of CITYVIEW Real Estate was the former VP of Sales and Marketing for the well known CITYLIGHTS building. She is still considered the expert on this property and is a top producer of resales there. Darleen also handles resales elsewhere in LIC and often shows new product to her clients for comparison. According to Darleen: "The market is still strong; with more product available, people are taking longer to make decisions. Resales have been turning over in 30 to 60 days vs. a typical 30 - 90 days, so they're back to normal, but the market is hanging in there. New developments have adjusted some prices which were getting high."
While it is apparent that sales velocity has slowed some in LIC, recent reports from the blogosphere suggest that new developments are still selling reasonably well. Curbed recently reported that Ten 63 Jackson Ave. has sold out 30 of its 37 units. Studios sold for around $375,000, 1BRs for $465,000 and 2BRs for $610,000, with an average sell-out price of $759 per square foot. According to LIQ City, One Hunters Point and Hunters View - both developed by Simone Development of Westchester - which started selling last October, have sold a combined 40% of their units. Curbed also recently opined that Crescent Club was in price increase mode on a couple of dozen units, which soon went to contract.
Still, rumors are circulating that the narrow windows seen being installed at 11-15 50th Avenue imply a "direct to rental" situation. The logic goes that condos have big windows, particularly when NYC views are an amenity, because owners pay the heating bills. Apartments are equipped with smaller windows, to keep this cost lower for landlords. The development had reportedly filed a Co-operative Policy Statement 1 (CPS1) with the state Attorney General's office, according to LIQ City, which allows general advertising of a development, without specific price information. An offering plan has supposedly not yet been accepted, further feeding the speculation.
Either way, the arrival of new tenants or new owners to LIC is seen as an overall net positive. One of the complaints about the area, from some but not all quarters, is that it's under-retailed. I pointed out the magnitude of this situation in my prior piece. According to Dan Minor, at the Long Island City Business Improvement District (LICBID):
It is very understandable that retail may be cautious until more tenants arrive in Long Island City and it's a bit of a chicken and egg situationAccording to Eric Benain, demand for retail space is on fire and rents have rapidly escalated to the $55 - $70 per square foot range.
That said, the much-awaited and somewhat delayed arrivals of Duane Reade and The Amish Market to the Queens West waterfront complex (The Amish Market opening is said to be postponed until at least May) is seen as a big boost to the livability factor for potential new residents. Rumors continue to circulate that Starbucks will be "arriving" in LIC with a store in the Eastcoast building and potentially one on Vernon/Jackson Avenues. Other recent additions to the nabe, according to LIQ City include Ethereal (a women's clothing boutique), City Vet (pet care), BANY (Japanese fusion restaurant) and Ihawan (Asian Grill & Sushi Bar).
Bottom line: The things I like about LIC - one stop from Manhattan, neighborhood feel and great views- appear to continue to attract people to the area, which still holds lots of long-term appreciation potential. The necessary amenities are coming into focus, which I see as a big positive to the area moving out of the pioneering phase. My backbone still says there will be deals coming in this market as development continues apace while the economy cools. Savvy buyers should be keeping their eyes on the Pepsi sign and the buildings springing up beyond.
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Comments (4)
LIC has a great long term future, but condo prices will be challenged over the short term. There is too much inventory in LIC and buyers have been hestitant to buy in this current environment. The crowded open houses do not mean much. I went to numerous crowded open houses in LIC, and there are very few sales (based no movement on the listings). Unless viewers turn into buyers, my guess is that prices will fall over the next few months. The only exception is the well price condos ($650 per sq. ft) have been selling to first time buyer, but even that has slowed down over the past few months. The higher priced units have been sitting, and will sit for a long time until they make some price adjustment. In addition, Rockrose plans to go to market soon with a couple of hundreds of condos.
Posted by JT | March 6, 2008 9:29 AM
Terrific detailed analysis, Jeff! Balanced pros v. cons are *so* hard to find in the RE blogosphere. THX
Posted by Sandy Mattingly | March 6, 2008 11:03 AM
Sandy,
Thanks for the compliment. Noah and I really have tried to be balanced in the factual data and perspectives we bring to readers. Unfortunately, with the predominance of bad news, it has been hard not to seem overly negative. That said we see bargains coming in some NYC markets.
Posted by jeff | March 6, 2008 2:50 PM
Jeff,
Why do you use brokers as your sources of information and why would you believe anything they say? In my experience, brokers will always put a rosy spin on even the most dire of circumstances. I've been looking to buy and in the past few months I have been told by brokers: 1) "Don't worry about the economy, the worst is over", 2) "The drop in the stock market? That's just a blip", 3) "I have 3 bids for this unit already!" (2 months later, the unit is still on the market), 4) "The schools in this neighborhood are fantastic!" (The zone school was recently put on the list of schools failing to meet minimum evaluation requirements) 5) "The crime rate in this area is no worse than in Manhattan" (Compstat reports from the NYPD prove otherwise).
Essentially, you have to discount anything that comes out of a broker's mouth regarding the condition of the market. It's in their nature to talk-up the market, especially when asked about a neighborhood they cover. A broker specializing in LIC for example (i.e. they make their living selling apartments in that area) has a vested interest in promoting that area. It's like asking Obama who he thinks should be the next president.
While I appreciate your writing and spotlighting different areas, I believe your sources are less than credible and that the actual state of the market is much different than that implied by the brokers you spoke to.
Posted by Condo Buyer | March 9, 2008 11:51 AM