For years, Long Island City has been experiencing rapid growth: New residential high-rises were built left and right, with thousands of residential units slated for delivery by 2020. Amazon took notice, choosing the Queens neighborhood for the site of its proposed second North American headquarters in 2020.
But a lot can change in a couple of years. Amazon scrapped its plans to move to Long Island City, and then coronavirus hit, leading renters to ditch their new apartments and sending vacancy rates soaring. And that could spell trouble for the developers of those enormous apartment towers.
According to data from Trepp, occupancy at two major residential projects has declined sharply from last year, leading to debt backing those towers being added to the data firm’s watchlist.
At Tishman Speyers’ 1,871-unit Jackson Park, occupancy declined from 96 percent in 2019 to 59 percent as of September 2020. The developer started construction on the project, located at 28-10 Jackson Avenue, in 2015, and it opened in phases starting in 2018. It financed through $1 billion in CMBS debt, which is now on Trepp’s watchlist.
“We have no doubt that we will quickly return to full occupancy once the current pandemic is under control,” a spokesperson for Tishman Speyer said. “In fact, we have seen traffic and leasing activity return to 2019 levels over the past few months. We have been and remain fully up-to-date on our loan service payments.”
Nearby, RockRose Development’s 715-unit Linc LIC, at 43-10 Crescent Street, saw occupancy decline from 91 percent in 2019 to 67 percent in the third quarter of 2020. The property backs a $194.7 million CMBS loan, which is also on Trepp’s watchlist. The firm, led by Henry and Justin Elghanayan, completed the 42-story building in 2014.
RockRose did not immediately return a request for comment.
In 2018, the real estate marketplace Localize.city reported that 6,400 new residential units would be coming to Long Island City in 2020, the most of any neighborhood in NYC. But Covid stymied demand for those units; the number of new leases signed in Northwest Queens, which includes Long Island City, had declined every month for more than a year until recently, according to data from Douglas Elliman’s market reports.
Rents in Northwest Queens, meanwhile, have also dropped sharply. The median apartment price in the neighborhood was $2,400 in December 2020, down from $2,795 in the same period last year. And more than 60 percent of all available listings come with some form of rental concession from landlords.
Both buildings are also packed with amenities that may have once been a draw for renters, but are likely less attractive due to the social distancing required by the pandemic. At Jackson Park, a 50,000-square-foot clubhouse with a golf simulator, poker room and fitness center. At Linc LIC, the high-end perks include a screening room and a billiards table as well as a bilevel fitness center with a basketball court and a squash court.
Apartment landlords have largely been spared from the coronavirus induced devastation that other real estate owners have felt. But increasingly, multifamily owners in New York are showing strains. In some cases, New York renters have left the city or have terminated their leases.
In Manhattan’s Financial District, Brookfield’s New York by Gehry saw rental occupancy fall to 74 percent in September from 98 percent at the end of 2019, according to Trepp. Occupancy at the 899-unit building had remained above 93 percent since 2014.