New York City’s new development activity has long been focused on popular neighborhoods in Manhattan and Brooklyn. But with home prices on the rise in Queens, some major Manhattan developers are now venturing into the borough for the first time.
Builders like the World-Wide Group, the Lightstone Group, L+M Development and Property Markets Group are building massive rental towers in Queens, most of them in rapidly developing Long Island City.
Statistics on Queens’ new development are hard to come by, since the city’s largest brokerage firms don’t track transactions in the borough. But over the next three years, Queens is slated to see the construction of more than 8,000 units of new residential housing, according to estimates from the brokerage Aptsandlofts.com. That figure is a big increase from the immediate aftermath of the recession, brokers said, and it’s roughly on par with the pace of building in Manhattan, where approximately 5,350 new rental and condo units are expected to come online in the next 24 months, according to data from new development marketing firm Corcoran Sunshine.
This month, using records from the city’s Department of Buildings as well as news reports and information from sources, The Real Deal identified more than 60 new apartment buildings with at least 10 units in the pipeline for Queens. While most are in Long Island City, neighborhoods like Astoria, Ridgewood and Flushing are also seeing residential construction.
Developers are increasingly drawn to Queens — and especially Long Island City — because large development sites are still available there. Plus, home prices are rising as new restaurants and stores appear, said Mitchell Hochberg, president of Lightstone, which is currently leasing its 12-story, 199-unit Gantry Park Landing project in Long Island City.
The building is Lightstone’s first ever in Queens, and the company has plans for two more large Long Island City rental projects in the next few years, he said.
“Long Island City in particular has matured to a point where it has both the infrastructure and the scale to be a real neighborhood that people want to live in,” Hochberg said. “Add in the easy commute [to Midtown] and the affordability factor, and you have a very exciting alternative to Manhattan.”
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Over the past decade, Long Island City’s dramatic transformation has been well-documented by TRD and other news outlets. The changes date back to a 2001 rezoning, which allowed substantial mixed-use developments to be built on 37 blocks in the neighborhood’s central business district.
Large new residential projects slated for Long Island City include a 197-unit project at 45-46 Pearson Street developed by L+M, and World-Wide’s 421-unit, 40-story rental tower near Queens Plaza. Property Markets Group, meanwhile, is in the design phase for a 400-unit apartment complex in Court Square, also in Long Island City.
For World-Wide, headed by Victor Elmaleh, this is the first Queens project in decades.
David Lowenfeld, executive vice president at World-Wide, told TRD that the neighborhood is at a tipping point, similar to Lower Manhattan in the late 1990s, when the firm developed the new condo 88 Greenwich Street.
Building in Long Island City now is “an opportunity to provide a product at a compelling price point, in an emerging residential neighborhood attractive to people looking for ‘the cool,’” Lowenfeld said.
World-Wide and other newcomers are competing with neighborhood stalwarts such as the longtime Long Island City developer Rockrose, which has been developing in the neighborhood since the 1980s and just started leasing its 709-unit rental building Linc LIC. Rockrose has plans for several other large new rental projects in the neighborhood, including a 975-unit tower at 43-25 Hunter Street, and a 700-unit rental conversion of a building once owned by Eagle Electric Manufacturing, at 43-22 Queens Street. Outside of Long Island City, fewer big-name developers are active. One exception is Manhattan-based Silverstone Property Group, which is constructing a 14-story, 89-unit rental building at 92-61 165th Street in Jamaica. In addition, the Rockefeller Group and TDC Development and Construction are planning an $850 million mixed-used project in Downtown Flushing. The project, dubbed Flushing Commons, will include 620 residential units, 275,000 square feet of retail and 234,000 square feet of office or hotel space, according to the developers. The project, which was announced almost 10 years ago, is finally slated to begin construction this fall, according to news reports.
The availability of sizable development sites zoned for large-scale development is key to the increased construction activity. In established Manhattan and Brooklyn neighborhoods, there are few large development sites left, industry experts said.
“If you want to build a 300-unit building, it’s tough to do that in a place like Williamsburg today,” said Josh Zegen, a co-founder of the commercial real estate investment firm Madison Realty Capital, which has financed several new developments in Queens in recent months. “In Long Island City, you can do that because you don’t have the same height restrictions.”
Lightstone’s Hochberg said Queens offered his firm the chance to make just one large acquisition rather than assembling a site, which can take years in Manhattan and trendy areas of Brooklyn. And because the sites are larger, he said, construction in Queens is also easier.
But there are limitations to development in Queens. For example, a 2010 rezoning of 238 blocks in Astoria prevents developers from building large projects on some of the neighborhood’s most desirable, tree-lined blocks. As a result, most of the new projects coming to Astoria are smaller than those on tap for Long Island City. They are also being spearheaded by individual developers rather than megafirms. A 28-unit rental building by local developer Charalabos Bakalis is, for instance, coming to 28-18 Astoria Boulevard, according to records filed with the city. Meanwhile, at 23-15 Astoria Boulevard, a 37-unit project is being developed by George Miltiadou, and a 24-unit residential property by entrepreneur Emanuel Kaliontzakis is slated for 26-25 28th Street. The developers did not respond to requests for comment.
Relying on rentals
Most of the major new developments in Queens right now are rentals, which developers see as the best fit for the neighborhood’s somewhat-transient population of young professionals, Hochberg said. But it’s also due to the recent increase in rents in the area.
For example, the median monthly rent for a one-bedroom apartment in a doorman building in Long Island City increased from $2,825 in 2011 to $2,890 in 2012, according to data from marketing firm Nancy Packes.
Other new rental projects in the pipeline include the well-known 5Pointz graffiti building at 45-46 Davis Street in Long Island City, where owners Jerry and David Wolkoff have controversial plans to demolish the iconic structure to make way for some 1,000 rental units in two towers. The proposal was approved by the City Planning Commission in late August, and is now seeking City Council approval. The Wolkoffs could not be reached for comment.
Vornado Realty Trust also has plans for a 314-unit residential building above its Rego Park shopping mall near the Long Island Expressway. Vornado declined to comment, but sources said the 24-story, 287,113-square-foot addition, designed by SLCE Architects, will house rental apartments.
Another reason there are more rentals than condos in the Queens new construction pipeline is because banks have been reluctant to finance condos in the borough, experts said.
Two years ago — when many of the projects now hitting the market were starting construction — “the market was just starting to stabilize in New York and the safe bet was rentals,” said Harold Valestin, a vice president at the residential brokerage MNS.
Mainstream banks are only now beginning to warm up to the idea of construction loans for condo projects in Queens — and only for established developers with long track records of success.
Moreover, in recent years, certain areas of Queens, including large chunks of Long Island City, have been added to the city’s list of “geographic exclusion” areas for the 421a program, which means that the valuable tax abatement is not available to developers in those areas unless they make 20 percent of their units affordable, an unappealing prospect for many condo developers.
Sources also noted that Queens is one of the few remaining areas of the city where building rentals is still economically viable. In popular areas of Manhattan and Brooklyn, land prices have climbed so high that building luxury condos is the only strategy that makes financial sense, sources said.
Plus, many longtime, family-run Long Island City-focused companies, such as Rockrose, TF Cornerstone, Brause Realty and Heatherwood Communities, prefer rentals because they can hold onto them and keep them for future generations. Heatherwood, for example, is currently planning a 145-unit rental at 42-25 27th Street, while Brause is building a 270,000-square-foot rental building at 44-30 Purves Street, also in Long Island City.
“We don’t like condos because it means building and selling,” said David Brause, president of the eponymous firm, which owns the MetLife Plaza office tower in Long Island City. “We like building and holding for the long term.”
Turning to condos
Queens’ developers may change this “build and hold” strategy in the next few years, however, if condo prices continue to skyrocket. And some fear that the oncoming surge of new rental units could create a glut, causing rents to plateau or drop.
In fact, that could already be starting to happen. The average rental rate for a Long Island City luxury apartment was $53 per square foot in the second quarter, roughly the same as the previous quarter, according to data from Long Island City-based brokerage Modern Spaces.
But the median sales price for an apartment in a Queens new development was $570,156 in the second quarter, a 25.8 percent jump from the same period in 2012, according to data from the brokerage Douglas Elliman.
Some developers have already turned to condo development, especially in Long Island City, where some high-end condos sell for more than $1,000 per square foot. Rising Developers Group has plans for a 10-story mixed-use project at 42-60 Crescent Street in Hunters Point South. And in Flushing, Madison Realty Capital recently closed on a deal to recapitalize Victoria Towers, a 99-unit condominium currently under construction at 133-38 Sanford Avenue. Madison’s Zegen said condo sales prices in Flushing range from $600 to $800 per square foot.
“No one could have predicted the market we’re in right now, so they all went full steam ahead with their rental projects,” said Rick Rosa, an associate broker and the manager of Douglas Elliman’s Long Island City office.”Now, you have all these renters who want to buy, so people are shifting their gears.”
Even Rockrose, which has long preferred rentals, is entertaining the notion of building condos down the road.
“The problem [with building condos] is I can’t bear to give up the value,” said Justin Elghanayan, president of Rockrose. He added that selling units rather than hanging on to them “seems like too much of a shame.” But if pricing keeps going up, he said, Rockrose may consider building a condominium on a triangular parcel it owns opposite the Linc site.
But selling new condos in Queens without the 421a abatement will be a challenge, noted Eric Benaim, CEO of Modern Spaces, which will be handling sales at several new condo projects next year.
“We might have more incentives, and the price tag might be a little bit lower” than in the past, he said. “It will be a real test of the market to see how those are absorbed.”
Correction: An earlier version of this story incorrectly stated the number of units at 45-46 Pearson Street. There are 197 units.