One year later, Amazon Effect still felt in LIC, citywide

New York Issue /
Feb.February 14, 2020 07:30 AM

(Illustration by Neil Webb)

For a while, people thought Josh Schuster, the managing principal of Silverback Development, was a genius.

Just a few weeks after Amazon announced in late 2018 that it would open an East Coast headquarters in Long Island City, Schuster finalized a deal already in the works to buy a half-built rental nearby for a condo conversion. In early February last year, Silverback started construction, and he filed an offering plan around the same time.

“At first, people were like ‘Kudos! Accolades!’ ‘How did you know it would happen?’” Schuster said.

But just days later, on Valentine’s Day, facing local backlash over billions of dollars in subsidies and fears of gentrification, Amazon kissed New York goodbye — breaking a lot of hearts in the real estate community.

“When Amazon left, it was definitely deflating,” Schuster said.

There have been few whirlwind reversals in New York real estate history to compare with the fleeting frenzy surrounding the plans for Amazon’s “HQ2” in LIC, which inspired a mania of dealmaking but also a fevered opposition that ended up killing the nascent megaproject in its crib just three and a half months after the announcement.

But it wasn’t all sound and fury signifying nothing. There’s evidence that the e-commerce giant’s brief, turbulent fling with the Queens neighborhood has actually had a lasting, positive impact on LIC — even as the toxic political backlash may have done enduring harm to development in the city as a whole.

The immediate “Amazon Effect” was dramatic and short-lived. There were 145 deals struck in LIC during the exuberant period when HQ2 was expected that closed, according to broker Patrick W. Smith in Corcoran’s LIC office — a rate of some 43 deals per month. But that plummeted to about 10 per month after Amazon backed out, with 110 deals in the 10 months to the end of 2019 based on what has closed so far.

“It’s been like a roller-coaster ride,” said Greg Blake, a director of Meadow Partners, which is marketing the Independent, a co-op conversion of a rental at 42-14 Crescent Street.

But all the attention has left something of a halo effect on LIC.

“It’s not good that Amazon left,” said Blake, “but it does make a statement that they wanted to be here.”

Amazon prime real estate

Amazon’s departure hasn’t derailed Silverback’s plans, or those of other developers. Indeed, since the Amazon breakup, Silverback has raised prices three times at Hero, its 109-unit, 23-story project at 24-16 Queens Plaza South.

“Did Amazon create a public relations value-add? Absolutely,” said Corcoran’s Smith.

“It put us in the global eye,” said Eric Benaim, the founder of the local brokerage Modern Spaces, who did 162 media interviews with outlets from England, Japan and France, among other places, in that three-month Amazon era.

The weekend after Amazon’s announcement, Arcadia 27, a glassy 32-unit property at 42-50 27th Street, saw 50 buyers at an open house, up from a typical five, said Kevin Chen, an agent with Chase Global Realty, which is handling sales for developer Ampiera Group. “And those 50 people did not know what Long Island City was before,” Chen said.

After the e-tailer canceled its order, however, attendance at open houses immediately dropped off, Chen said, and three of the four buyers who signed contracts during the Amazon period even wanted out. Nonetheless, as of last month, 75 percent of Arcadia 27’s units were sold, for around $1,300 a square foot, according to Chen.

On balance, the local market does seem better off now than pre-Amazon, according to Modern Spaces. LIC saw 122 contract signings in all of 2018, the firm said, but in just the six months that followed Amazon’s 2019 pullout, there were 414 contract signings.

“Amazon has some of the smartest people in the world working for them, and they picked Long Island City,” said Schuster. “So people are now thinking, ‘It’s got to be great.’”

Unable Basin

The fate of the would-be Amazon site is still in limbo, however. Any big residential or commercial projects at the nearly 13-acre parcel around the East River inlet Anable Basin will require a rezoning, which landlords, developers and city officials are all more cautious about after the storm of opposition that washed away HQ2.

TF Cornerstone and Plaxall, landlords who together control most of the land on the waterfront site, have put the brakes on rezoning initiatives that began several years ago, real estate sources say.

Instead, those firms and two other major local property owners, L&L MAG and Simon Baron Development, have created a mechanism to win community support. Formed at the urging of city officials, the initiative is dubbed Your LIC and is holding a series of workshops inviting locals to weigh in on what they would like to see any future project include, such as new parks and local hiring initiatives.

Only after this exhaustive consultation will the developers launch the formal rezoning process, probably next year.

Still, some local real estate players doubt that any amount of community outreach can clear the way for new big developments in LIC.

“Honestly, I’m not even expecting the rezoning of the waterfront to happen at this point,” said Paul Januszewski, the vice president of planning for Rockrose Development, which owns five residential rental buildings in the neighborhood. “If I was a neighbor and saw all this development happening already, it would be tough to convince me that more density is needed. It’s a tough audience to present it to.”

Joseph Palumbo, a manager of Rising Developers Group — which is working on GreyStone LIC, a 12-unit condo at 5-25 47th Road — believes that even if the rezoning eventually goes through, LIC has lost its chance to attract another corporate presence with the placemaking power of Amazon.

“That ship has sailed,” he said.

A toxic waste

Palumbo blames poisoned politics for scaring off Amazon and making both the city and major developers gun-shy about championing another blockbuster development in LIC.

He said politicians like City Council member Jimmy Van Bramer, state Sen. Michael Gianaris and U.S. Rep. Alexandria Ocasio-Cortez were misguided when they slammed the massive HQ2 project as a harbinger of gentrification.

“I have news for those three politicians,” Palumbo said. “Long Island City was already gentrified before Amazon showed up.”

TF Cornerstone, Plaxall, L&L MAG and Simon Baron all declined to comment individually for this story, but deferred to Your LIC.

“We are currently in the middle of an extensive public engagement process with in-person workshops and online forums to share ideas, and the response has been amazing,” said Your LIC in a statement. “Top of mind throughout all of this is equity and inclusivity. Economically, socially, and physically, we want this district to be a place that builds on LIC’s history as a center of productivity and innovation, with jobs and workforce opportunities, and a spectacular waterfront open space for the public.”

TF Cornerstone’s Tom Elghanayan, whose firm is also behind the nearby Hunters Point South development, told TRD at the recent REBNY gala that the e-tailer’s departure doesn’t diminish prospects for LIC.

“We never expected Amazon, you know? We were going to do that development out there, and so Amazon came along and it was like manna from the heavens,” he said.

But Elghanayan also said that the toxic politics that sank the Amazon project have soured him on the city as a whole.

“Frankly, we’re looking to extricate ourselves from New York, ultimately,” he said, “because I think the politics have gotten so bad. We’re going to finish what we have, but we’re going to look elsewhere.”

Editor’s note: This story has been updated from the print version to include the statement provided by Your LIC.


Related Articles

arrow_forward_ios
Amazon's Jeff Bezos, Google's Sundar Pichai and Facebook's Mark Zuckerberg (Getty, iStock)

Tech giants occupy nearly 600M-sf of US real estate

Tech giants occupy nearly 600M-sf of US real estate
Matthew Dicker, Adam Gordon and Jeff Bezos with 1255 and 12595 Flatlands Avenue (Getty, Brooklyn Logistics Center) 

Amazon inks major warehouse deal in East New York

Amazon inks major warehouse deal in East New York
Amazon's Jeff Bezos, Thor Equities' Joseph Sitt, and 280 Richards Street (Photos via Getty; Thor Equities)

Amazon inks deal for 312K-sf at Thor’s Red Hook warehouse

Amazon inks deal for 312K-sf at Thor’s Red Hook warehouse
Jeff Bezos (Getty, iStock)

“We are erring on the side of having too much capacity”: Amazon reports massive Q3

“We are erring on the side of having too much capacity”: Amazon reports massive Q3
Amazon CEO Jeff Bezos with (top to bottom) 5 Warehouse Lane in Elmsford in Westchester County, 2300 Linden Boulevard in Brooklyn and 1502 Bassett Avenue in the Bronx (Getty; Google Maps)

Amazon inks three warehouse deals for delivery stations

Amazon inks three warehouse deals for delivery stations
Amazon CEO Jeff Bezos and the Matrix Global Logistics Park in Staten Island (Google Maps; Getty)

Amazon inks huge deal for 975K sf warehouse

Amazon inks huge deal for 975K sf warehouse
Matrix Global Logistics Park site on Staten Island (Matrix Companies, Google Maps, iStock)

Industrial leasing surges in NYC as other sectors flounder

Industrial leasing surges in NYC as other sectors flounder
Blackstone's Frank Cohen and Amazon CEO Jeff Bezos with the HQ2 site (Getty; Blackstone; Google Maps)

Amazon grows HQ2 site near DC with hotel buy

Amazon grows HQ2 site near DC with hotel buy
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...