The Flushing real estate scene was once considered a niche market for Asian communities. But in the past few years, the tide has turned.
Stephen Preuss, vice president of sales at Massey Knakal Realty Services, said that today he’s not only seeing a vibrant Asian market, but also Canadian, European, and South American capital heading to Flushing.
In this month’s Q&A, developers and brokers talked to The Real Deal about the neighborhood’s changing terrain. While condos like Sky View Parc, Residence 8 and the Sequoia made their debuts several years ago, there are now new mega-mixed-used projects underway.
Those mega-projects — specifically Willets Point, which is being developed by the Related Companies and Sterling Equities, as well as Flushing Commons, which is being developed by AECOM Capital, F & T Group, the Rockefeller Group Development Corporation and others — will likely generate a new wave of real estate activity.
“We’ve seen this tremendous renaissance in Brooklyn, and now I think it’s shifting into Queens,” said Michael Dana, president and CEO of private equity firm Onex Real Estate Partners. “And I think that Flushing is the epicenter of this tremendous growth.”
Still, concerns about zoning are partly overshadowing the potential for building. While some big-name developers are stepping up their game in Flushing, without large swathes of land to build upon, sources said most of the area will continue to be dominated by smaller-scale projects.
For more on prices in the Flushing market, investment opportunities there and cultural nuances — like the importance of feng shui — we turn to our panel of experts.
vice president of sales, Massey Knakal Realty Services
How does activity in the commercial and development markets in Flushing compare to last year, the year before and during the boom?
The price for land in most of the greater Flushing market is actually higher than before the downturn. We’re getting as much as 20 to 35 percent gains year-over-year. In downtown Flushing around Main Street and the surrounding three to four blocks, you’re looking at prices in excess of $200 per buildable square foot, and that can go as high as $300 per buildable square foot. In the secondary areas, it’s $150 to $200, and in the tertiary it’s $75 to $150 per buildable square foot.
What are the biggest challenges to marketing commercial properties in Flushing today? How do those challenges differ from what you’ve seen in recent years?
The challenge in the Flushing market is product. There’s not enough product or inventory for the existing demand, which is partly fueling the increase in pricing. We’re seeing it change slowly, though. There’s definitely more product on the market this year than last year. When there is more inventory and there is more to choose from, [buyers] may not pay the prices they’re willing to pay now.
What are the most surprising trends you are seeing in the Flushing market today?
I think Flushing is broadening in terms of the investors looking at it right now. And the international investors are not only from Asia. I’ve had some people from Canada, and some European capital. Some South American capital, as well. It’s still not as much as what you see in Manhattan. But until 12 months ago, I had never gotten calls from those people. I get those calls all the time now.
Other than Willets Point, what are the most exciting new development projects being built or planned in Flushing right now?
The RKO Keith’s Theater, which was approved for an approximately 400,000-square-foot development, had been in limbo for a while and was just sold. The new buyers are going to build that theater into a mixed-use facility. Because it’s a little smaller than Flushing Commons, it’ll get built quicker, and I think it will have a more immediate impact on the neighborhood.
president, F+T Group
How does activity in the commercial and development markets in Flushing now compare to last year, the year before that and during the boom?
It’s in the last two years that the development really started to kick in. Take Sky View Parc. Once the recession hit, [that project] was the biggest casualty. They had a whole tower that had no sales … and now they’ve sold out. That’s the best indicator of how the market is faring. During the recession, overall, Flushing thrived and did better than the city average in terms of unemployment and in terms of real estate value. And I think [that is because] even though there’s been a downturn in the U.S. economy, China and Asia as a whole are doing well. The dynamic behind the Flushing phenomenon is the unique role that Flushing plays in the geopolitical scheme.
What is holding up the commercial market in Flushing in your view?
Queens is the most ethnically diverse county in the country. Flushing is a destination, particularly on the weekends, for the Asian community in the Tri-state area. That community comes to Flushing to eat, to shop and for medical care because there’s a huge concentration of Chinese and Korean doctors. So there’s a huge demand for office space. The other critical factor is that the Chinese community is very driven by real estate. There’s a huge appetite to own real estate, not rent it.
What are the biggest challenges to marketing properties in Flushing today?
Up until now, it’s been the ethnic insularity of Flushing. You’ll see much of the signage is in Chinese. You also have cultural nuances. Feng shui is really important — the placement of doors, placement of bathrooms, configuration of hallways, placement of columns. For example, when we go to market on Flushing Commons, we expect to bring in a feng shui master. [In addition], the waterfront needs rezoning. There’s pollution in the waterway. That area along the river, unless you clean it up, it’s going to be like the Berlin Wall. When it gets rezoned, it will get cleaned up. If we can get that done, I think it’s going to be a huge change for all of Flushing.
senior director, Eastern Consolidated
How does activity in the commercial and residential markets in Flushing now compare to last year, the year before that and during the boom?
What I’m seeing for Flushing is that as dense as it already is, it’s getting denser. There’s a strong movement of owners and tenants from Chinatown. They’re feeling the pressure of increased rents and increased demand and values. In addition, those who own are getting tempted [to sell] by the record-breaking prices in the area. And owners and tenants alike are seeing better opportunities for the quality of living in Flushing than they are in Chinatown. The apartments are prettier, newer and more spacious. The rents are commensurate if not better than what they’re paying in Manhattan. There isn’t the crime that you might find in other areas. It is a tight-knit community, where a lot of them have invested in their homes, and so there’s a real standard to maintaining them. I think that’s going to continue to fuel that market. During the boom, the pricing for apartments was in the $400 to $500-a-foot range. Now it’s something like $600 to $700 a foot. The demand is getting stronger by the day. You don’t see a lot of foreclosures here because these people come in here and pay cash. They don’t overleverage. That also helps to maintain the stability of the area.
What are the biggest challenges to marketing commercial properties in Flushing today?
A few years ago, everyone thought that you needed to speak English to transact in New York City. Today, you have Asian speakers who can navigate through the nuances of that specific market. We have three or four Asian language–speaking brokers on our team who have been able to speak to investors in their language. So we can navigate through that market because we’re equipped. But it behooves anyone to [have brokers who know] any language spoken in that area.
What sort of a discount percentage-wise is available for commercial properties in Flushing, compared with other parts of Queens, like Long Island City and Astoria?
I don’t think there’s a discount for Flushing. I think there’s a premium in Flushing. I think you have better retail today in Flushing than you do in Long Island City. The density of population is not the same. There are more people per square foot in Flushing than there are in Long Island City.
What are the most surprising trends you see in the Flushing real estate market today?
Most surprising to me is that I’m seeing people who have small properties trying to leverage the sale of that into something larger. There’s a strong and dedicated commitment to staying in the community. Owners are trading up as opposed to trading out.
There are a bunch of big-name players developing Willets Point and Flushing Commons. How does that impact the landscape in Flushing?
I think it’s a very strong vote of confidence to see these types of developers continuing to build there and continuing to make the area better. I do think that will open up the doors for new developers and developers who may not have looked at Flushing as a tried and true area.
president/CEO, Onex Real Estate Partners
There have been a number of reports about residential prices rising in Flushing. What are you seeing on that front?
Over the last year we’ve seen increases in pricing of 10 to 15 percent. I think you’re going to see those levels of increase each year for the next two to three years, because of the relative lack of supply and pent-up demand. When you look at Flushing compared to other opportunities in New York City, Flushing continues to be, for luxury high-rise new construction, the best value you can buy. In Long Island City, it’s $1,300 per square foot or more. In Flushing, it’s $750 to $800 per square foot, and that’s a huge discount. But I think that will narrow over the next several years. You might always see some discount to those markets, but not that much of a discount.
There are a bunch of big-name players developing projects in Flushing. How does that impact the landscape there?
I think you will see other big-name developers come to the area. There is a much higher level of product being delivered now, and we’re at the early stages of that trend.
What sorts of opportunities exist along the waterfront in Flushing for developers?
This is the natural next area to be developed. Right now, the use of that waterfront is more industrial. With Willets Point coming up, and with the planned cleanup of the water there, you’re going to see predominantly residential, but probably more office-type developments running up the waterfront. We’re working hard to try and accelerate the cleanup. Funding issues caused by the economy will probably delay that. But it’s definitely something we’re pushing for.
principal/broker, Fultonex Realty
How does activity in the residential market in Flushing now compare to last year, the year before and during the boom?
It’s been increasing, because the word is out that not only Willets Point is coming to the area, but also Flushing Commons. People are exploring the future investment potential and going full-speed ahead.
Are you seeing residential sales and rentals accelerating? How long are properties staying on the market, and how does that compare with a year or two ago?
From my experience as a broker, I’m getting calls for future developments. People want to be on a waiting list, to be called upon when a development is up for sale. I get calls on a daily basis. Most of our deals are all cash. Within the Asian community, if an individual can’t afford a property, they invest with other family members. But it’s all cash. And that gives them the opportunity to refinance later. It gives them bargaining power, too.
What are you seeing in terms of prices for residential? How much are they up or down by compared to the recent past?
For luxury, I’m seeing $800 per square foot. On the smaller projects, where you have maybe 20 to 30 units and they’re a little more conservative on the finishings, they can range from $400 to $600 per square foot. It’s slowly increasing year by year. Developers justify that housing is limited, and that warrants the increase in price.
Which residential price ranges and housing types are performing best right now in Flushing, and how does that compare to the recent past?
People with families often look toward the two-family. That way, they have an extra rental, and they get to live in the other unit. The starter families, entrepreneurs and Wall Street people love condos. In that case, the biggest preference is a two-bedroom condo. The trend is to own. Asians are born with three principles: Have a family, have a business and own where you live. We’re not too much into renting.
What are the biggest challenges to marketing residential properties in Flushing today? How do those challenges differ from what you’ve seen in recent years?
The challenges for marketing houses concerns feng shui — the location, the direction the house is facing, the address numbers.… They don’t like the number four because in Chinese it sounds like the word for “death.” Or if someone has passed in the house.… All this is asked in the showing of the house, and it can delay a quick sale.
In parts of Queens, the focus is on single-family home development over condos, but Flushing has its share of condos, including Sky View Parc, Residence 8 and the Sequoia, which all went up several years ago, as well as newer projects. What concerns do you have about the climate for building condos?
There are concerns with zoning. As development properties come up for sale, if they’re not in a favorable condo zone, the developer might have to make changes to the project. There’s a lot of land for sale, but if you can’t build what you want on it, it can hurt the sale. Zoning needs to change. More immigrants are coming in and they need more housing. It’s great you have houses surrounding the Flushing area. But again, condos are becoming more favorable. If there’s enough demand from property owners, I think the city will pay attention to the zoning.
broker, Douglas Elliman
How’s the Flushing residential market doing in general?
Flushing’s closed residential [sales] are up by a huge amount, and the prices are going up, but the inventory is decreasing, and so are the listings that we have coming in. Every arrow is up except for the inventory. I think the new development projects [in the works] are needed.
What else are you seeing in terms of residential prices?
The average price of a condo is up 14 percent from a year ago. In co-ops, the sold prices are also up about 14 percent. Compare that to the rest of Queens, where the average price is up 6.8 percent in co-ops. In single and multi-family homes, prices on closed properties year to date are up 12 percent.
Who are the active residential buyers in Flushing right now? Are you seeing any changes in the demographics, or does it remain largely an Asian market?
What I see is a lot of Manhattan people coming into Queens. I’ve never seen so many Manhattan agents in the Queens’ market with their clients and customers. And Flushing has always been one of our most popular markets. Since 20 years ago, Flushing has been one of the neighborhoods that kept us busiest.
What market forces are prompting developers to build condos in Flushing today?
I think it fills the need of how people want to live. It’s like a city within a city. Sky View Parc, for example, has everything they need there. People are very busy and it’s luxury living and they don’t have to worry about the maintenance of the home. I think condo living focuses on that need.