Why LIC’s Condo Market is Growing More than Ever
Amid Rental Market Uncertainty, Developers Look To For-Sale Product
By Rey Mashayekhi
As Long Island City’s residential real estate market has boomed over the past decade, bringing thousands of new apartments to the neighborhood and promising tens of thousands more, one segment of the market has been curiously underrepresented: condos.
Indeed, of the roughly 11,500 new units built in Long Island City since 2006, the overwhelming majority -- more than 8,700 apartments -- have been rentals, while only around 2,800 have been residential condominiums, according to data from the Long Island City partnership. It is a dynamic expected to continue in the near future; of the roughly 23,000 units currently in LIC’s residential pipeline, over 21,000 are designated as rentals -- with only around 1,200 condo units planned for the area.
There are a variety of factors that have contributed to this rental-heavy approach. Outer borough neighborhoods like Long Island City are critical to New York City’s middle-class, workforce housing stock, with rents in Manhattan -- let alone for-sale home prices -- having long since hit astronomical levels. Rental development, meanwhile, has been heavily incentivized through publicly-backed initiatives (think public/private partnerships like Hunter’s Point South ) and developer tax breaks like 421a.
But there are signs this dynamic may be changing. The sheer volume of rental supply due to arrive in LIC has led to some downward pressure on rents in the neighborhood, according to some observers, while 421a’s expiry at the beginning of last year led to a decline in new rental projects planned across the city in 2016. As such, some are concerned about continually weakening conditions in the rental market, particularly for higher-priced, “luxury” product.
“I see the rental market taking kind of a dip [in 2017],” Eric Benaim, the founder, president and CEO of Long Island City-based brokerage Modern Spaces, told Living LIC recently -- citing the “large amount of [rental] supply coming online this year” in Long Island City.
Benaim and other real estate market sources have noted that more landlords are handing out concessions to tenants, such as free rent, in order to boost leasing momentum at their properties. With that sort of market pressure at play, Benaim predicted a shift in the Long Island City residential market to for-sale condo inventory, with “some developers who built rental projects” in the neighborhood even going as far as to “turn those into condos" should they continue to underperform.
Such efforts would be designed to take advantage of growing demand for condo inventory in LIC, which has increasingly established itself as a residential destination for those seeking to buy rather than rent. Much of that demand is down to economic value -- “Prices [for condos in Long Island City] are still reasonable,” Benaim said, in comparison to the overheated market for luxury apartments in Manhattan and Brooklyn.
Jonathan Miller, president and CEO of real estate appraisal and consulting firm Miller Samuel, agreed with that assessment, noting that the predilection among developers toward rental projects in the outer boroughs has arguably left a need for condos in these residential markets. “[In] the outer boroughs -- Brooklyn and western Queens, in particular -- you could argue that there’s a shortage of new condominiums, because the emphasis has been on rentals.”
Condo sales in Long Island City “continued to surge” through the end of last year, according to Miller Samuel’s quarterly Elliman Report for northwest Queens. The average sales price for a condo in Long Island City was just over $1.08 million at the end of the fourth quarter of 2016, according to the report -- up 5.7 percent from the previous quarter and a nearly 17 percent jump from the same period in 2015. The average price per square foot of $1,140, meanwhile, also grew but at a much lower rate -- up 2 percent from the previous quarter, albeit flat from the year-earlier period.
Those numbers are indicative of the kind of value available for condo buyers in Long Island City, particularly when compared to the for-sale apartment market in Manhattan and even Brooklyn. While the vaunted Manhattan condo market outperformed through 2015 thanks to demand from wealthy foreign buyers and investors -- subsequently prompting a whole cadre of new, ultra-high-priced developments on “Billionaires’ Row” in Midtown -- Long Island City and similar outer borough neighborhoods are appealing to New Yorkers of more modest means seeking the opportunity to own an apartment in the city.
That has prompted an array of new condominium developments in LIC that are seeking to serve this demand, ranging from the aforementioned, modestly-priced inventory to more expensive apartments that wouldn’t be out of place in Manhattan -- like the 2,415-square-foot duplex penthouse at Casa Vizcaya, at 10-40 46th Road, which earned the distinction of Queens’ second-priciest condo last year at a price of $4.15 million.
Developers like Lions Group, led by the Shirian family, have invested in the condo sector in Long Island City for years -- mostly through mid-sized projects like the Vista, a 48-unit condo building at 44-15 Purves Street, and the Bindery, a 20-unit boutique condo at 47-34 11th Street. The company is now recalibrating its strategy more towards rentals and developing increasingly larger projects, such as a 20-story, 110-unit high-rise at 42-10 27th Street and two 30-story, Raymond Chan-designed towers at 26-32 and 27-01 Jackson Avenue.
Rising Developers Group (RDG) is another firm that has focused on building condos in LIC, including its most recent project: the Factory House, a 10-story, 37-unit condo building at 42-60 Crescent Street, which was completed last last year and has units priced up to $3.45 million. Other RDG condo developments in the neighborhood include the Solarium, built in 2010 at 5-43 48th Avenue; the Prestige, built in 2009 at 5-04 50th Avenue; and the JP Galaxy, built in 2007 at 5-03 50th Avenue.
Sales also kicked off last year at the Monarch, a 21-unit building at 47-05 5th Street; the Jackson, a 56-unit, industrially-inspired structure at 1333 Jackson Avenue; and the Harrison, a 120-unit condo that has earned the distinction as Long Island City’s tallest condo building, at 27 stories. And in Queens Plaza South, developer Property Markets Group has placed its newly built, 45-story, 391-unit rental tower at 23-01 42nd Road on the market -- but not before filing a $364 million condo plan with the state, leaving open the possibility of the building’s conversion into for-sale units.
With these projects representing only some of the new inventory that has arrived in Long Island City recently, and thousands of more units promised in the coming years, we could be seeing the start of a condo craze in LIC.