The Real Deal New York

Why investors are flocking to Far Rockaway

With a fresh rezoning and new transit improvements, major NYC developers have upped their interest in the seaside enclave
By Eddie Small | January 26, 2018 08:00AM

A stretch of beach on the peninsula, where major developers are building rentals and condos

Far Rockaway may be one of the farthest-flung parts of the city, but over the past few years that hasn’t been much of a detriment to development. And a rezoning and new ferry service to Lower Manhattan are only adding to the boom.

Several big-name developers have taken note of the area’s investment potential in the last few years, rushing to erect a mix of affordable and market-rate projects in the Queens neighborhood.

For instance, Related Companies is planning a 145-unit below-market-rate project in downtown Far Rockaway north of its Gateway Apartments complex, and the Marcal Group is building a condo along Beach 116th Street, where units will likely go for between $500 and $600 per square foot.

MDG Design + Construction, meanwhile, is also making a big play on the peninsula. The firm recently landed a 99-year lease for the NYC Housing Authority’s Ocean Bay apartments, which it’s pouring $560 million into renovating. And Michael Stern’s JDS Development is completing a 60-unit rental with prices ranging from $2,650 to $4,300 — significantly higher than the Rockaways’ median asking rent, which stood at $1,895 as of November, according to StreetEasy.

Marcal CEO Mark Caller said investors in Far Rockaway are looking to either buy land for future projects or snap up existing buildings. But he noted that it’s a tricky area to invest in, because it’s not as established as other NYC neighborhoods and because building requirements have become increasingly stringent since the area was devastated by Hurricane Sandy in 2012.

Marcal’s project, for example, will not have any residential units on the first floor, and the JDS project is designed with flood vents.

But Caller said the boom in the Rockaways is very real. “We’ve watched the trends of home prices moving up and more and more people coming into the Rockaways,” he said. “We’ve seen a real resurgence.”

The neighborhood is indeed much further along than all the others on TRD’s list — with major Manhattan players like Related and JDS already placing their bets. But the numbers are not as striking — the area saw a 2 percent increase in residential applications in 2017 compared to the prior three-year average. That might be because developers caught on to the area long before they moved into some of those other neighborhoods. But Far Rockaway was rezoned in September, sparking a new round of investment interest.

Developers filed applications for 166 new residential units in Far Rockaway in 2017, more than twice the previous year and roughly the same as what they filed when the market was booming in 2015. The number of proposed new units peaked at 239 in 2014.

Commercial sales volume in the neighborhood only totaled about $19.7 million in 2017, but it has been much higher in recent years, hitting a recent peak of about $109 million in 2014. Caller estimated that land typically goes for about $60 per buildable square foot in Far Rockaway, offering developers a cheap alternative to pricier areas of the city.

Median home prices were hovering between $400,000 and $500,000 throughout much of 2017, and sales volume has been increasing over the past few years, according to StreetEasy. The area had nearly 530 residential sales in 2017 as of November — up from below 400 from 2011 to 2014 and down slightly from a peak of almost 600 in 2015.

Even the area’s infamous inaccessibility has become less of an issue, thanks to ferry service that launched last May between Far Rockaway, Sunset Park and Wall Street.

Although the beach remains the biggest draw — and trendy bars like the Rockaway Beach Surf Club with its Mexican food outpost, Tacoway Beach, bring Manhattan and Brooklyn crowds during the summer — the area is becoming more popular in the off-season, said Lisa Jackson, broker/owner of Rockaway Properties.

“People are opening up businesses and realizing that this is a year-round place,” she said. “Airbnb is now popular here. They’re building hotels. They have more apartments, so there’s a lot more going on.”

Click here to read more about outer borough areas that investors are running to in New York City.