Dissecting the Queens condo craze

NYC’s largest borough is setting new records with a surge of development projects coming down the pike

Compared to Manhattan and Brooklyn’s trendy glass towers, new condominium projects in Queens have drawn less attention. But that’s quickly changing. For three of the past five years, developers built more expensive condo projects in Queens than in Brooklyn, an analysis by The Real Deal found. And the borough’s most popular neighborhoods — including Long Island City, Astoria and Flushing — continue to set new records with the number of condo units in the pipeline. So far this year, developers have filed plans for 47 new projects in Queens, making it the strongest year in a decade, according to the New York Attorney General’s office. There are now 2,354 condo units under construction in the borough, with more than 950 of them in the Hunter’s Point section of Long Island City.

Chris Xu’s $700 million Court Square City View Tower, meanwhile, is slated to become the tallest building in Queens when it tops out at 778 feet by 2022. Financing for the 802-unit tower, like many others backed by experienced developers, seems to have come easily; Xu secured a $502 million construction loan from JPMorgan Chase and other big banks in July. With the average condo sales price in Queens now hovering around $670,000, units in the borough can be seen as a bargain compared to an average price of about $1.1 million in Brooklyn and more than $2.6 million in Manhattan, according to Douglas Elliman’s third-quarter data. But the question is whether buyers will find a view of Manhattan from an LIC tower more desirable than a view from the heart of the city — even at a lower price. TRD talked to three industry players about the booming condo market in Queens and how sustainable it is.

Garrett Derderian
Director of Data & Reporting, Stribling & Associates

How much growth are you seeing in the Queens condo market, and is it enough to warrant big changes for your firm’s agents? In the second quarter, there were 128 condo sales in Northwest Queens, and [during] the same period in 2017, there were 82 sales. That’s a 56 percent increase and one of the largest jumps we’ve seen since 2008. We actually just opened an office in Long Island City, in a WeWork, so we’re expanding into the market right now, and we want to be more active in the space.

Are you finding there’s a lot of competition, or is it an open field? From our perspective, we view it as more open at this point. There’s no major brokerage included in The Real Deal’s rankings that has, at least to my knowledge, a large extensive database for Queens. I cover the entire borough of Queens in our market reports, and I believe we’re the only ones who break everything down so specifically across the entire borough. We don’t only look at the new condo development — we’re also comparing those buyers to single-family home buyers, and those homes make up most of the housing stock.

Is this boom coming out of the blue, or were there signs? We’ve seen a lot of rental development in Queens over the last five to seven years. Now that the rental product has been in place for a period of time, developers are going in as prices start to increase, but right before they get too expensive. They’re buying pieces of land to build condos, and they’ll look to local renters who’ve established a lifestyle there and try to turn them into buyers.

Would you say that’s a trend you’ve seen across the city? Downtown Brooklyn closely mirrors what’s now happening in Northwest Queens. But there’s really only one extremely large tower coming to market in that part of Queens: Court Square City View Tower, with more than 800 units. That’s really going to be the test of the market.

What do you make of the record number of condo developments filed this year? Until recently, the construction boom in Queens really hasn’t translated to large-scale developments, but now we’re seeing a change. Instead of builders solely focusing on the LIC waterfront, we’re starting to see more developers occupy space along Jackson Avenue. You’re closer to the transit hubs, and now they’re building taller buildings, and it’s a very easy commute to Midtown. But it remains to be seen if buyers looking for a $1 to $3 million condo in Manhattan will consider a similarly priced unit across the river worthwhile.

Jonathan Miller
President and CEO, Miller Samuel

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Do you think the influx of Queens condos is viable in the long term, or is it going to cause to a glut? Since Queens’ residential market is skewed heavily toward rental, to come in and build large-scale condo projects — if they’re priced correctly — is viable. But it will probably take longer than projections suggest to get to that point. The way I think of Queens is that it’s benefited significantly from the Brooklyn spillover.

When did that become a factor? Three or four years ago, you started to hear “Queens is the new Brooklyn,” and now you hear “The Bronx is the new Queens.” So, there’s been this outward push in development — which is now pivoting from rental to condo.

What do you make of so many developers filing plans at the same time? The challenge in the last four or five years is that you have global capital driving the market as investors look for higher returns in a low-interest world. And many developers got the same idea at the same time but were less aware of their competitors until later in the development cycle. Often, you have those that are first in who do really well. Then you have a lot of copycats, or people who are half a step behind. At some point, the concept becomes fully saturated and then the next developer goes elsewhere or changes the product type.

Are more Manhattan developers coming into Queens? They are and there will be more competition. They see opportunity just like the locals do, and the locals have a homefield advantage. This development cycle is far different than the activity we saw a decade ago. A decade ago, credit was fast and loose and anybody with a pulse could get financing for a development. It was just a different world. This cycle, credit conditions are best for the tried and true developer with a long track record. It doesn’t even matter whether their projects are successful or not; what really matters is that they’ve been around.

Eric Benaim
CEO and Founder, Modern Spaces

As a Queens-based real estate group that runs a residential brokerage and new development division catering to developers, what do you think about the recent numbers in the condo market? This is more planned condos than I’ve ever seen before in the borough — and I’ve been working in Queens real estate since 2005.

What’s driving that? A couple of things. Now that 421a has disappeared, a lot of the developers are changing their business plans and doing condos. Then, in the last couple years, Queens has been getting a lot more popular and populated, so obviously land prices and property prices are going up with that.

Your firm’s third-quarter report shows that condo prices are going up, but closed sales and sales volume is dropping. Is that worrying? No. There was a period a few years ago where condo prices rose about 20 percent because of the lack of inventory. Now there’s a lot more inventory, so it’s leveling out. There’s still a lot more supply than there was in the past. In the next eight to 12 months, Modern Spaces is going to put about 1,400 units on the market. But prices are coming back to earth.

What do you expect to see with the influx of new development? It’s going to give a lot more people options. Over the past years, there really haven’t been that many options in LIC — maybe two or three new buildings open a year. Now we’re starting to see a huge variety: low-rises, townhouses, high-rises and so on. We’re marketing a 68-story tower soon. That can open up the market to a lot more people who maybe didn’t think of coming here.

Do you think this is the start of something similar to what Brooklyn has experienced? For Queens as a whole? I don’t think so. I think eventually people in certain neighborhoods will get priced out, but I think they’ll move to other neighborhoods where prices are still very affordable. If you go to Forest Hills, for example, you can still buy a 1,000-square-foot one-bedroom in the $300,000s. I remember when Brooklyn started becoming hot, and every six to eight months, a new neighborhood came on the map and everybody was going crazy.

This is from someone who was born and raised and never lived anywhere else besides Queens. It’ll probably take another 20 or more years before something like that happens. And that’s good, I think.