The delay in the construction of the Second Avenue subway — long expected to be a boon for the Upper East Side real estate market — will not derail property values over the long-term, but could pose a threat in the short-term, brokers say. As construction drags on, buyers may be deterred and prices pushed downward because of worries over further postponements, the closure of local businesses and the mess of living near construction sites.
Between now and whenever the subway is completed, said Halstead
Property Senior Vice President Rena Goldstein, it could be difficult to
interest buyers in Upper East Side properties east of Third Avenue.
Goldstein said she chose not to show one Second Avenue apartment in the
70s to buyers searching for a pied-à-terre because she knew they didn’t
want to live near construction for the next seven or eight years.
“It’s going to be a lot harder to sell property [on the Upper
East Side]… it’s going to be like that for a long time.” The
construction will likely mean fewer customers for local businesses,
leading some to close, she said — another negative for prospective
residents. “When stores start to become empty, then it impacts
negatively on the community around it and …on the value of apartments.”
A Metropolitan Transportation Authority review of the subway project found that the completion date of the first phase, originally expected to be June 2015, is more likely to be December 2016. Additional delays could push back the opening to the summer of 2017. And the Federal Transit Administration estimated in a separate analysis that the first segment of the subway line might not be completed until June 2018, the New York Times reported.
The costs of the project have also gone up to as much as $5.728 billion from $4.775 billion, according to the New York Post. The first phase will include tunnels between 105th and 63rd streets and new stations at 72nd, 86th and 96th streets along Second Avenue, according to the MTA Web site. The subway line will eventually stretch all the way to the Financial District.
Kathy Braddock, co-founder of Charles Rutenberg Realty in New York,
said she didn’t think a one- or two-year delay would turn potential
buyers away from the Upper East Side neighborhood where the first phase
of the Second Avenue subway is being built.
“I don’t think
that psychologically that makes a difference …. I think it’s going to be a
mess for a while, and I don’t know if the extra year is really going to
be a huge deterrent,” she said.
Asher Alcobi, president, principal and founder of Peter Ashe Real Estate, said he didn’t think the delay would stop any residential or commercial private sector planning for the area, either.
One concern for potential buyers as the project is delayed, Braddock the consultant said, is whether it will be finished at all. If the city’s finances make it impossible to complete the project, a hole in the ground, “no matter what the price [of real estate], would be a deterrent,” she said. And some buyers might expect discounts now because of the construction’s expected impact on the neighborhood.
But once the subway is completed, Alcobi said it will boost prices in the area significantly and could have a wide-ranging impact on city real estate. Wall Street employees might relocate uptown from the Financial District, and subway access to East Harlem could improve development there, Alcobi said. And buyers who previously refused to look east of Third Avenue will broaden their horizons, Halstead’s Goldstein added, noting: “the far East Side will come up in value.”
Buyers who choose to look east of Third Avenue today stand to benefit whenever the project is done, Braddock said.
“If you have some vision and you have some belief … if you have a long-term hold and it all goes smoothly, you’ve made a very wise choice.”