For decades, Long Island City has carried the title "next great neighborhood." While scattered developments in the area just east of Midtown Manhattan have been successful, the critical mass necessary for a transformation has been elusive.
Now, the money finally seems to be in place. Many of the nation's most prominent real estate investors, including Avalon Bay Communities, Tishman Speyer, the Durst Organization, Toll Brothers, Rockrose Development, and Citigroup are actively developing residential or commercial properties in Long Island City.
The chairman of the Long Island City business improvement district, David Brause, said his organization is tracking between 8 million and 10 million square feet of total development in the core of the area.
"Long Island City is truly firing on all cylinders," Mr. Brause, whose company Brause Realty owns MetLife Plaza, said. "The office, residential, retail, and hotel markets are on fire out here. With 4,000 apartments completed or under construction, 5 million square feet of office development, and the arrival of retail, we have created a true 24/7 community in this exciting neighborhood."
Mr. Brause said the area would be enhanced by the new $50 million city- and state-funded park on Queens Plaza, which is scheduled to break ground by the beginning of 2008. "Offering low rents and condo prices, great transportation access, and amazing views of Manhattan, Long Island City has never been more attractive to businesses and residents," he said.
With Manhattan's commercial real estate market showing office rents surpassing all-time highs and the average asking rent up 37% from last year, as reported by Cushman & Wakefield, Long Island City is a prime location for a company to relocate some or all of its office operations.
The vice chairman of Cushman & Wakefield, Joshua Kuriloff, said Long Island City "is undergoing a major renaissance, driven by the city's upzoning of the area and the active involvement of many of New York City's most prominent developers, including Tishman Speyer and the Durst Organization. There is 5 million square feet of commercial planned and park land."
He added: "For available space today, demand is strong. We're marketing 400,000 square feet on behalf of MetLife at One MetLife Plaza, which has had a tremendous amount of activity and interest."
The president of LPF Developers, Perry Fine, a principal at Triangle Services, said Long Island City "has one of the most extensive mass transit connections, with the 7, E, F, G, N, W, R, the LIRR, and the Water Taxi all serving the area. It has the arts, parks, one of the lowest rates of crime in the city, and even a white sand beach overlooking Manhattan. Every day new buildings are being built and new stores and restaurants are opening. This forgotten industrial area is forging through its renaissance and converting to an affordable extension of Midtown."
"The handwriting is on the wall for Long Island City," Ms. Fine said. "After a long and well thought-out rezoning by the Department of City Planning, the efforts of their work are starting to bloom."
Investment activity is on the rise in the once-neglected area. According to the president of Shalom Zucerbrot, Frank Zuckerbrot, Court Square Center, a six-story, 130,000-square-foot office building, recently sold for $33 million, or about $250 a square foot. The loft building was converted in the 1980s to office space and acquired after a foreclosure by the original developer in the mid-1990s.
The investment broker Studley is offering for sale a 7.5-acre water view development site near the East River facing Midtown. The site — which is expected to be rezoned for residential use — is presently encumbered by two commercial properties leased to credit tenants who are paying $2.7 million in net rent. The site has an area of 326,000 square feet and a potential development capacity of up to 1.6 million square feet, inclusive of potential bonuses.
"Of all the waterfront communities surrounding Manhattan ,Long Island City has the best views and enjoys the easiest access," the executivemanagingdirectoratStudley, Woody Heller, said.
"As an investment, Long Island City is a perfectly poised development opportunity in that the market is proven but not fully mature. Any entitlement risk has been mitigated as the City has announced plans to rezone the area, and our site offers income support from the existing buildings and credit tenants during that process," Mr. Heller said.
With at least 3,000 units already under construction and more than 4,000 in various stages of planning, the residential market is booming in Long Island City. The city's Hunters Point Special District and Central Business District rezoning created tremendous potential for residential development. "Two years ago, we bought the best residential site that was available," the vice president for development at Toll Brothers, David Von Spreckelsen, said. "We are building 117 condominiums and are selling them at a rate and price greater than we ever expected. We are now about 80% sold at an average price of $775 per square foot and occupancy isn't until the end of the year. We have had a couple of sales that exceeded $1,000 per square foot."
He added: "We are finding a smaller price differential between Long Island City and Williamsburg than we expected and, significantly, that there are many who prefer Long Island City over northern Brooklyn no matter what the price. My only issue with Long Island City is that I can't get my hands on another site."
The managing director at Prudential Douglas Elliman, Andrew Gerringer, said, the best place to buy today, where an individual can get in on the ground floor of the residential real estate market, is Long Island City.
"Long Island City remains one of the best examples of an up and coming market where you can get a lot of bang for the buck, and prices that are 50% below what you would pay in Manhattan for the same size condominium unit," Mr. Gerringer said.
Perhaps the largest conversion of a commercial building into a residential condominium is the Arris Lofts, the former Eagle Electric building, which is a development of the Andalex Group. The property was converted into 237 condominium units. According to real estate sources, more than 35 units have been sold for more than $1 million and a few have traded for $2 million — possibly the highest price ever achieved for a condominium apartment in Long Island City.
"This was the first time in Long Island City that a real, full-service, Manhattan-style building with all the bells and whistles had been developed in the neighborhood," Mr. Gerringer said.
The chief operating officer of the Andalex Group, Alexander Silverman, said the property is "88% sold and things are moving along very well. The building should be completed in January and we have signed contracts selling for over $1,000 per square foot."
Rockrose Development has made a major commitment to Long Island City, with planned development of more than 3,200 rental and condominium units. According to real estate sources, apartments are now renting for around $40 a square foot, compared to $65 to $70 in Midtown and $80 on the Lower East Side. Probably the biggest residential developer in Long Island City is Rockrose Development. The director of leasing and sales at Rockrose Development, Kathleen Scott, said the company has had "an overwhelming response to our second building at 4705 Center Blvd., at East Coast. In the first three weeks, we have leased 75 apartments. Most of the new residents are coming from Manhattan."
The chief operating officer of Citi Habitats, Gary Malin, said, "Rental rates for a new residential rental development, loaded with amenities, start at $2,110 for a studio, $2,490 for a one bedroom, and $4,115 for a two bedroom. As for residential sales, the price per square foot for amenity laden new developments is in the $700range, competitive with that sales price in Manhattan."
The director of special projects at Prudential Douglas Elliman, Christopher De Weaver, said price "is always important and in this current market everyone wants to feel like they got a deal. In Long Island City, you can walk away feeling like a winner because usually what the consumer is buying is a high quality product that has great proximity and is at a better price than what the uber-hip Williamsburg is going for."
RETAIL & HOTELS
Retailers and the hospitality industry are finally arriving in Long Island City. The principal at Rockrose Development, Thomas Elghanayan, said retail "is expanding on Vernon Boulevard and at East Coast with the first Duane Reade, a 20,000 square foot Amish Market, a liquor store, espresso shops, and much more."
A managing director at Cushman & Wakefield, Eric Lewis, said there are "about 300 hotel rooms under construction and 1,800 additional rooms in 14 new projects in various stages of planning. Properties that are scheduled to open shortly include a 48-room Quality Inn, a 74-room Days Inn, a 150-room Fairfield Inn, and a Suites by Marriott."
"Nevertheless, the capital market crunch may prevent some of the new properties planned from coming to market over the next three years," Mr. Lewis added.
All signs are aligned for major development to take place in this once commercial hub. I concur with Mr. Kurloff when he says, "With the city's active involvement, a hidden opportunity has become a hidden gem in Long Island City."
Mr. Stoler, a contributing editor to The New York Sun, is a television and radio broadcaster and a senior principal at a real estate investment fund. He can be reached at [email protected]