Editor’s note: This story was published before Amazon announced it was abandoning its plans to build a campus in Queens.
Almost immediately after city and state officials announced their deal with Amazon to build half of its “second headquarters” in Long Island City, the criticism came pouring in.
Many were upset about the nearly $3 billion subsidy package the e-commerce giant will receive, the lack of transparency throughout the process and the glaring provision to build a helipad for Jeff Bezos on the planned office tower’s roof.
In LIC’s real estate market, though, the news was received with open arms and then some — especially at the local brokerage Modern Spaces.
“I think it’s going to be a huge boost for the neighborhood, not that the neighborhood didn’t have it already with all the housing that’s being developed,” Eric Benaim, the firm’s co-founder and CEO, told The Real Deal. “But I think Long Island City has been setting itself up for this moment” for years, he noted.
Benaim’s excitement over Amazon’s move to Queens is palpable. Modern Spaces has become a leading player in LIC and nearby Astoria since it opened for business just over 10 years ago, so the addition of 25,000 workers to the area virtually guarantees the firm an influx of new business.
But Amazon’s arrival is also expected to bring far more competition, as the deal shines an even brighter spotlight on what has become an increasingly prominent New York neighborhood.
Real estate consultant Nancy Packes said she expects to see more rivalries among brokerages in LIC, fueled by rising prices and growing demand for homes. That could bode well for Modern Spaces, she added, as new entrants to the local real estate market may be more inclined to join it. “Having a footprint or being a first mover in an area has a kind of internal momentum,” Packes said. “If there’s more business to be had or higher transactions to be done, brokers are much more likely to associate themselves with a larger company than with a startup.”
Modern Spaces has already established itself as a force to be reckoned with in the western part of Queens with about $5 billion in transactions over the past 10 years, according to Benaim. The firm has made aggressive moves to defend its home turf before — such as suing Compass over alleged agent poaching and data theft — and will be prepared to go head to head with other brokerages if the market becomes all the more cutthroat, he noted.
“I’m not really worried,” Benaim said. “I’m sure other firms will come to Long Island City, and it’s fine because I had a 10-year head start.”
Feeding frenzy
The neighborhood’s real estate market had already become increasingly competitive over the past decade, long before the news of Amazon.
In three of the past five years, developers built pricier condo projects in Queens than in Brooklyn, with most of them concentrated in LIC, Astoria and Flushing. Active residential projects in LIC contained more than 6,500 units as of last December, 19 percent of which were associated with condos, according to a TRD analysis of Department of Buildings data. And by 2022, Citi Habitats estimates, there will be about 10,000 new rental units in the neighborhood.
“Every aspect of real estate development in Long Island City is becoming more competitive because people want a piece of the action,” said Aaron Shirian, managing director of the family-run real estate firm Lions Group NYC, which has several properties and new projects in the neighborhood. “For those of us who have been here for a long time, we need to be at our best. We need to adapt, and that’s just the way it goes.”
Several of the city’s more prominent brokerages now have offices in LIC, including Douglas Elliman, Compass, Nest Seekers International (where Benaim got his start), Halstead Property and Stribling & Associates.
But many of these firms did not arrive until years after Modern Spaces had already staked its claim in the neighborhood. Elliman opened an office on Vernon Boulevard in 2012, and Halstead followed with its digs on the same block in 2015. Stribling and Compass, meanwhile, both set up shop in LIC last year, in a WeWork space at 27-01 Queens Plaza North. Stribling has four employees there, while Compass has nearly 40 agents and plans to move to a new office in the neighborhood in the second quarter of the year.
Stribling is focused on landing new development assignments over the next few years while expanding its foothold in the resale market and hiring new agents, said Patrick Smith, who oversees its LIC operation.
Benaim said the rise in competition would have bothered him more a few years ago. But Modern Spaces has been able to grow its business even as brokerage activity in the neighborhood has increased, he maintained. The firm is marketing 2,100 of the 2,600 condo units and 3,000 of the 6,000 rental units coming to LIC in the next three years, according to Benaim.
“I’m right next door to Nest Seekers, and down the block is Halstead,” he said. “So all these companies are here already.”
Other major brokerages, including Corcoran, have yet to set up shop in the neighborhood (though Corcoran is rumored to be looking for an office there).
Stephen Kliegerman, president of Halstead Property Development Marketing, described Halstead and Modern Spaces as “friendly competitors.” The one issue his company has had with Benaim’s firm over the years is getting access to its new development pipeline, which he attributed to Modern Spaces’ strong resistance to co-brokering.
Long Island City
“I’ve received a number of inquiries from our brokers over the last couple of years saying that they call up [Modern Spaces] and try to get an appointment, and they’re told nothing is available,” Kliegerman said. “Then a buyer calls up, and the buyer is offered an appointment tomorrow.”
Modern Spaces has run into bigger problems with its younger, fast-growing competitor Compassb, which has landed more than $1 billion in venture funding from major backers like SoftBank and the Qatar Investment Authority.
Benaim’s firm became the latest brokerage to sue Compass early last year (for an undisclosed amount) — accusing the seven-year-old company of targeting Modern Spaces’ agents and stealing its data to establish a foothold in Queens. The court issued a temporary restraining order against Compass in June preventing it from using any proprietary information from Modern Spaces and from interacting with employees at the firm.
A Compass spokesperson declined to comment on the lawsuit, while Benaim described it as Modern Spaces “simply trying to protect its rights.”
“We hope to be able to resolve the case amicably,” he said.
Benaim added that his team has a good relationship with most of the residential brokerages in the neighborhood and said they all try to “play nice.”
Leaving the Nest
The 41-year-old CEO was born and raised in Queens, grew up in a single-family home in Jamaica Estates and went to the Kew-Forest School and Jamaica High School.
Before launching Modern Spaces in the summer of 2008, he ran Nest Seekers’ LIC office for about two years. Nest Seekers founder Eddie Shapiro said Benaim came recommended by another agent and made it known right away that his roots and future interests were both in Queens. So when Nest Seekers decided to open up an office on Vernon Boulevard in 2006, Benaim was an obvious choice to run it.
About six months later, the brokerage landed its first project in the neighborhood — TF Cornerstone’s 184-unit development at 46-30 Center Boulevard — and Shapiro said Benaim was visibly excited about doing deals there.
But despite having the opportunity to work full-time in his home borough, Benaim said, he eventually grew restless with feeling like an afterthought. “They were more focused on Manhattan, obviously,” he said of Nest Seekers, “and I just felt there was a lot more opportunity over here, and I wanted to do things my own way, so I decided to leave.”
Shapiro said there were no hard feelings over Benaim’s departure, though it meant their firms would be competing in the same neighborhood.
Benaim launched Modern Spaces out of a railroad apartment building on Vernon Boulevard with his business partner Ted Kokkoris and one other agent. They personally financed the business at the start with about $150,000, Benaim said.
The startup had only been in business for a few months when the collapse of Lehman Brothers and global financial crisis hit. Benaim said the economic turmoil turned out to be a blessing in disguise for Modern Spaces — Queens developers were suddenly finding themselves in tight spots with their banks and ended up coming to his new brokerage to help market their projects.
“Eric came in as kind of a white knight, where we were so low the only place to go was up,” said Smith of Stribling. “And he very smartly opened his shop just as those developers began to encounter significant problems with their sales.”
The first project Modern Spaces took over was the Powerhouse, a 177-unit building near the waterfront, according to Benaim. That was followed by 10-63 Jackson Avenue, the Murano at 5-19 Borden Avenue and several more over the course of a year.
The brokerage landed another key assignment in 2010 with developer Cheskel Schwimmer’s 83-unit condo project known as the Yard. The 12-story building at 2-26 50th Avenue was the first new development project for Modern Spaces, but Benaim’s team was concerned that Schwimmer’s design was too flashy and convinced him to give them a chance to redesign it.
Modern Spaces now has five offices — two in LIC, two in Astoria and one in Manhattan — and about 100 employees, with plans to hire roughly 40 more, Benaim said. While the brokerage dabbles in commercial leasing and investment sales, the bulk of its business is residential sales and rentals.
The firm is still finalizing its numbers from 2018, but Benaim said 2017 was Modern Spaces’ biggest year yet, with about $1 billion in closed deals. “I think all the hard work of focusing on Long Island City is finally paying off,” he said.
The Amazon effect
At the same time, while Amazon’s move to LIC will almost certainly further transform the neighborhood, the rate at which that happens is still up for debate.
Recent studies from appraisal firm Miller Samuel have shown that the e-commerce giant’s announcement has yet to impact the local rental market. And several industry sources noted that Amazon’s full arrival in the neighborhood is expected to take 10 years, making it still too far away to have any notable impact on the brokerage landscape in LIC.
“By and large, the brokerage firms in New York City are very conventional in their thinking and are, most of the time, short-term in their planning,” said Donna Olshan, who runs the boutique residential brokerage and data provider Olshan Realty. “I don’t think they’ll rush out there yet. They may in a year, but I think they’ll just take their time and study it.”
Adrian Lupu, a senior vice president at Nest Seekers, said that while he expects to see more brokerages come to the neighborhood over time, doing so right away, when Amazon may not be fully moved in for a decade, would be risky.
“I don’t see new brokerages coming in, setting up shop and hoping to make a name for themselves or get any serious business at this point,” Lupu said. “Ten years down the line, it’s possible. Now, I don’t see it.”
But a market report from Modern Spaces on 2018’s fourth quarter found that demand for condos in LIC surged in the month following Amazon’s HQ2 announcement. While the third quarter of the year ended with about 38 percent of the neighborhood’s total condo units in contract, the fourth quarter ended with about 65 percent, according to the firm’s research.
And a recent Stribling report found that total dollar volume for condo sales in Long Island City last year was about $304 million — a 12 percent increase from 2017 and the highest dollar volume dating back to at least 2006.
A TRD analysis from November found that, out of all brokerages in the neighborhood, Modern Spaces was in the best position to benefit from Amazon’s arrival, with about 32 percent of active sales listings. Halstead had about 17 percent, while Douglas Elliman had about 13 percent.
Jennifer Dorfmann, Modern Spaces’ executive vice president, said it would be “crazy” for other brokerages not to set their sights on LIC. But she and Benaim insisted that their foothold in Queens is cemented.
“I’m not saying people don’t try to go after us,” Benaim said. “They do. But we’ve held strong.”
He added that his bigger concern had been trying to sell all of the inventory coming to the neighborhood, but the news of Amazon’s planned office campus largely put that to rest.
“I had some nights where I wasn’t really sleeping because we had billions and billions of products that we needed to sell,” he said. “Since the Amazon announcement, we’ve had a huge amount of interest in sales. Those worries are kind of over.”