Spotlight LIC: Risk w/ Plenty of Reward
Noah's recent posts on the Jumbo mortgage crunch, new condo closings and new trend to conservative appraisals (yes the Hating has begun) inspired me to write about an up and coming NYC market that is both near and dear to my heart, but also could be both problematic for developers and an opportunity for long-term investors in the near-term. 
That market is Long Island City (LIC). Interestingly, my friend Mike Stoler, who is widely recognized as one of the most informed investors on the Manhattan market has recently written favorably (in a long-term sense) on the area in his New York Sun Column of October 4th, and he will be hosting a panel of mega LIC developers on his Stoler Report TV show on October 23rd. I mention this because I think with the primer below and Mike's article and panel potential homebuyers should become very well informed on this emerging NYC market. I have no doubt it will be a winning market from a quality of life and investment standpoint over ten years. But let me be clear here, a large surge of new product - 15,000 new residential and rental units by my count - coming on the market in the next few years in an emerging neighborhood that lacks critical mass and retail infrastructure means I see deals on new construction ahead. Note this mention of sponsor incentives in LIC in the Wall Street Journal recently. Couple this with my opinion that NYC will suffer a mild real estate price downturn, focused on condos and the boroughs and I think a potential homebuyer, buying for utilization ahead of investment may get a good deal on both in LIC in the next 18 months. Okay sorry for the preface, now everything you might want to know on LIC and gulp.... more (sorry for the length).
P.S.1, the world renowned showcase for cutting-edge contemporary artists, was founded in an abandoned school building in Long Island City in 1971. This was the beginning of the cultural re-emergence of Long Island City.
After going dark in the 1920s, the lights were turned back on at the old Astoria Film Studios in Long Island City in 1976, stoking the potential for the industrial neighborhood as a base for film and television production. Within 6 years, Silvercup Studios, Eaves & Brooks Costume Company, Bond Film Storage Service, Variety Scenis Studios and Film Treat International had relocated to Long Island City.
In 1984, Citibank acquired a 2-acre, 82,000 sq ft trapezoidal shaped site in LIC for an estimated $3.5MM ($42.68 per sq ft). This was reportedly 75% cheaper than land in Manhattan at the time. In February 1989, Citibank built the 48-story 1.4MM square foot One Court Square building. Citibank did not intend to take the entire building for occupancy, but was unable to attract other tenants.
In 2000, Michael Bailkin and Paul Travis of the Arete Group tried to buy two larger sites, including a large city-owned garage, at the junction of Queens Plaza and Jackson Avenue. they also bought air rights to part of Sunnyside Yards. These moves prompted the Department of City Planning to devise the Queens Plaza Special District (approved in 2001), which featured incentive bonuses and urban design guidelines that called for broad setbacks, new parks, and ground-floor retail shops to enliven the street. The lots Arete sought have since been sold to Tishman Speyer and were upzoned to Floor Area Ratio (FAR) 12, signaling a dense future for LIC.
In May 2001, MetLife announced that it entered into a lease with Brause Realty for the former Brewster building at 27-01 Bridge Plaza North. The city reportedly provided MetLife with 426MM in real estate tax abatements and other incentives for the move. Two years later, Brause finished an adjacent 12-story, 282,000 sq ft building which was connected to 1 MetLife Plaza. The location of the MetLife Plaza - proximate to a Twin Donut where Rikers Island inmates were released after serving their time - made this a poor choice for an early corporate relocation to LIC. MetLife has since moved its people back to Manhattan - the only real setback in the progress LIC has made in recent years.
In July 2001, the New York City Council approved the re-zoning of 37 blocks along Jackson Ave. The re-zoning was designed to facilitate commercial development and allow new residential projects. It was hoped that this re-zoning sould spur reinvestment and redevelopment, taking advantage of the neighborhood's proximity to Manhattan, outstanding mass transit and potential for significant development.
Th population of LIC is set to explode and demographics are about to change radically. Only 25,595 people lived in LIC as the the 2000 Census. The median household income level was $28,872 or only 68% of the U.S. average, with 27% below the poverty line. There will be more than 15,000 rental and condominium units entering the market over the next four year's according to Guild Partners' project database. Applying the 2000 average of 2.56 people per household to these units implies population growth of 38,400 people or a 150% increase over the next six years or so. The economic backdrop will be inexorably altered as well, considering that the median home value was $187,200 in 2000, while the vast majority of new units being added are selling for $500,000 and up. Commerce in LIC will also be impacted by the growth in commercial activity, as 7MM square feet of commercial space is set to enter the market over the next five years. Significant new office developments that are contemplated or in progress include Citicorp Square II, Silvercup Studios West, Queens Port and Gotham Center.
Planned improvements to street appearance and traffic flows will remake the streetscapes of LIC, particularly its downtown. Jackson Avenue is envisioned as the business district's main boulevard linking Queens Plaza with Court Square. It will also be revitalized with new planted medians, punlic art, pedestrian furniture, street lighting and improvement f nearby open spaces. Renovations to Queens Plaza are to be completed by 2009, with construction expected to start in 2007.
The post-war residential story of LIC is now being written in bold face. Bars and dining are on the upswing including Water Taxi Beach, Waterfront Crabhouse, Smokey's Bar & Grill, Riverview Restaurant/Lounge, Tournesol Bistro, P.J. Leahy's, Cafe Henri, Manetta's Restaurant, Manducatis, Tuk Tuk, Dorian Cafe, Brazil Coffee House, The Creek and the Cave, Dominie's Hoek, Meridian cafe, Lounge 47, LIC Bar, Brooks 1890 Restaurant, La Vuelta and Jackson Ave Steakhouse.
New additions to LIC retail scene include: Briggs & Costa, chish carries an array of imported furniture, household goods, candles, textiles, lighting and art. Several new businesses on Vernon Boulevard include a State Farm insurance office, photo studio/gallery and Blend - a new Latin Fusion restaurant.
Recreation:
P.S. 1
Chocolate Factory Theatre
Bernard Gallery
Socrates Sculpture Park
5 Pointz Gallery
Silvercup Studios
Thalia Spanish Theatre
Fisher Landau Center for Art
The Sculpture Center
Noguchi Museum
Several parks offer recreation opportunities in the area including the East Coast Esplanade, Hunters Point Community Park, Queens Bridge Park and Rainy Park. The recently approved waterfront development plan will expand Gantry Plaza State Park into a 1.5 mile esplanade punctuated by relaxation and recreation options. The views of Manhattan from Gantry Park - just one stop from Grand central on the #7 train - are nothing short of spectacular and worth a trip in and of themselves.
Condos and rentals in my favorite corner of LIC, Hunters Point, at The Gantry, City Lights, RiverEast (Rockrose) and 5 SL (Toll Bros.) have been absorbed well to date. In fact 5 SL by Toll Bros. increased prices at least 6 times during pre-sales and has busted through the $1,000 per square foot price point on some units (closing in on Manhattan prices).Still, I think the big backlog of units coming to market will make for some deals to be had. Also note, that sell out for properties nearer to the gritty Queens Plaza area have been slower than in the Hunters Point area and there have been some grumbles on blogs about quality of construction and service levels for otherwise highly publicized developments like the Arris Lofts.
Related Bloggings:
LIC Rising Update - New Site, Many Drawings (Curbed)
LIC Finally Reaches Critical Mass (NY Sun)
$1,000 Per SFT in the LIC (Curbed)
Condo Market Still Hot - In LIC At Least (A Fine Blog)
Bubblemania Returns To LIC (Curbed)
LICBDC Map of LIC Developments (OuterB)
Changing Tides in LIC (Greater New York)
Some New Orleans Flavor Comes to LIC (Long Island City Blog)
The Long & Short of LIC (New Media Newsroom 2007 A)
Image Source: Photo (c) John Roleke; About.com
