Developers see dollar signs in Second Avenue subway extension
MTA says it has the funding to extend the subway line north
East Harlem has lagged behind the development boom that has hit West and Central Harlem, but the Second Avenue Subway could change all that.
Although the first phase of the project took nearly 100 years to complete, rendering it the butt of jokes in shows ranging from “Mad Men” to “Unbreakable Kimmy Schmidt,” the MTA fully funded the second phase in its proposed 2020-2024 capital plan, meaning the wait might not be as long this time.
The plan includes $4.55 billion for the extension, which will add Second Avenue stations at East 106th Street, East 116th Street and East 125th Street, along with a new connection to Metro-North in East Harlem.
And while many in the real estate industry are hesitant to assume it will happen, especially given the epic delays that plagued the extension to the Upper East Side, they are still excited to see the potentially transformative project take such an important step.
“I’m bullish on that neighborhood in general,” said Jerry Gemignani, a broker at Keller Williams who works frequently in East Harlem. “If this actually happens, it’s only going to increase its attractiveness.”
Some developers have already invested in the neighborhood with an eye on the subway’s arrival.
Peter Fine, for instance, late last year spent $28.5 million to buy almost an entire block along Second Avenue between East 102nd and East 103rd streets, where he plans to build a 178-unit rental building. He expects to break ground in early November.
“I think it’s going to help the economy in general there,” Fine said of the subway extension. “It’s going to connect Lower Manhattan with Uptown, and the more connectedness, the better the market is going to be for real estate.”
Other projects planned for the neighborhood include a 19-story, 404-unit project from the Richman Group at 210 East 125th Street
and a 53,900-square-foot, 61-unit project at 2252 Third Avenue from investor Roy Moussaieff.
“I’ve been investing in East Harlem for over eight years now, so I’ve always had that in mind,” Moussaieff said of the Second Avenue subway. “I started investing in East Harlem knowing that the train would get there eventually. I didn’t do it for the short-term investment. It was always a long-term plan.”
Jonathan Rose Companies and L&M Development Partners are working on the massive 655-unit Sendero Verde complex in East Harlem, and Extell Development and the Durst Organization have together spent hundreds of millions of dollars on development sites near the proposed extension.
Durst purchased a pair of sites on opposite sides of Park Avenue and the south side of 125th Street for $111 million in 2016 and 2017, and Extell snapped up the entire south side of 125th Street between Third Avenue and Lexington Avenue in 2014 for $70 million
Coordinating some of these projects with the massive subway project will require a fair amount of engineering. Extell said in a statement following the release of the new MTA Capital Plan that it is working with the agency on “mutually satisfactory plans for the site that provide for new buildings and the Second Avenue subway extension.”
Durst spokesman Jordan Barowitz said it was good news that the MTA was moving forward with the project and that its financial commitment “takes a lot of projects out of limbo,” including Durst’s.
Multiple sources said the subway extension would work in tandem with the East Harlem rezoning approved by the City Council in late 2017 to transform its real estate landscape.
The rezoning spanned 96 blocks and aimed to create 1,288 units of affordable housing. It came with a promise of $222 million worth of community investment, including $50 million for NYCHA properties and $101 million for a new park between East 125th and East 132nd streets.
“I think the rezoning was designed, in many ways, with the extension in mind,” said StreetEasy senior economist Grant Long. “Making the area more accessible, encouraging more development, particularly in sections of East Harlem that are currently somewhat underdeveloped.”
Better subway access generally leads to higher rents, but that dynamic will be offset by the new housing supply, according to Long.
“You have a lot more supply coming on. That’s going to push rents down,” he said. “Although if you make the area more accessible, how that balances out, I think we’ll have to wait another decade to see.”
Brian Phillips, a Douglas Elliman agent who focuses on Harlem, said that the combination of the subway extension and the rezoning would make East Harlem a much more desirable place to live. However, he cautioned that any changes would likely take a long time.
“I don’t expect that prices will go up immediately, just like in Central Harlem when they opened up the Whole Foods,” he said.
A new subway line in East Harlem has the potential to change the neighborhood more substantially than it did the Upper East Side, where real estate was expensive well before the Q train arrived. Keller Williams agent Melissa Leifer said she expects the impact to be more comparable to what has occurred in some of Brooklyn’s gentrifying neighborhoods.
This means the area can expect the kind of anti-gentrification sentiment that has taken hold in Brooklyn, Leifer said. But she maintained that the subway will ultimately benefit the neighborhood.
“There will be more opportunities and more diverse restaurants and stores,” she said. “But there always is pushback when neighborhoods change.”