All the hoopla about Amazon transforming the Long Island City housing market may turn out to be a bunch of hype, experts say.
Realty firms said searches for homes for sale in the neighborhood have increased by as much as 500 percent since early November, when news teams began identifying the northwest Queens neighborhood as one of two locations selected for a future Amazon headquarters. A significant portion of the interest seems to be coming from investors, some of whom probably expect the rent they will be able to command there to skyrocket once the e-retailer moves into the neighborhood, an analytics firm said.
If this prediction proves true, market rents are unlikely to surge anytime soon, given that a development boom has left the area with hundreds of vacant apartments, some 10,000 more are still in the pipeline and few expect the majority of the 25,000 new Amazon workers to live right in Long Island City, brokers and data analysts said.
"This has been a bail out for those developers. They weren’t building because they knew Amazon was coming, and now they have a better chance of filling their units," said Jonathan Miller, president of the Miller Samuel appraising firm.
Between the first week in November and the last week in October, StreetEasy said searches on its platforms for residential properties for sale in Long Island City jumped 295 percent. The brokerage firm Halstead reported a 250 percent increase in open house queries in the area, and the realty company Modern Spaces said it saw a nearly 500 percent leap in for-sale searches in the neighborhood during that period.
That amount of attention is unprecedented in Long Island City, according to Eric Benaim, CEO of Modern Spaces.
"We have agents in the office that have been working overnight on Long Island City sales," said Benaim, who noted calls are coming from investors and home hunters alike. "In my 18 years in the business, I’ve never seen anything like this."
Although higher sales prices may precede Amazon’s arrival, experts expect the increases to be relatively smaller, and short lived. Beyond having hundreds of empty units on the market, the neighborhood is expected to gain 10,101 new apartments between now and 2022, according to Citi Habitats. The Amazon-fueled hunting herd will help revive a market that has stagnated amid a glut of new units, but the impact will probably be muted over time because of the abundance of supply in Long Island City, said David Maundrell, who oversees new developments in Queens for Citi Habitats.
"There were a lot of potential sites that weren’t touched on that will wake up. Those folks have an immediate pop in value," Maundrell said.
The pressure on rents will probably be even less pronounced, especially in the first few years, experts said. Amazon is slated to temporarily open its outpost in Court Square in 2019, while it builds its headquarters in the Anabel Basin and gradually increases its team to 25,000 over the next decade.
"Until they fully come in, rents will stay the same," Maundrell said.
Even then, brokers and analysts do not expect the majority of the 25,000 new workers to live in Long Island City, and some, like Miller, said their arrival is more likely to skew prices in nearby areas with fewer vacant units, such as Sunnyside, Astoria and Midtown East.
In Long Island City and the surrounding neighborhoods, rents have risen just $50 over the past three years, and fell during the first half of 2018 because of the breadth of units on the market, according to a StreetEasy analysis released last week. "The area’s rental market has struggled to absorb the enormous volume of high-priced rental units built in the past decade," the analysis noted.
In this environment, many landlords have resorted to covering brokers’ fees and waiving a month or two of rent to lure in tenants. According to the most recent Douglas Elliman report on the Western Queens rental market, nearly 58 percent of new leases signed in October included such a concession. Miller, who prepares the market reports for Douglas Elliman, said brokers will probably curb their reliance on concessions over the next couple of months.
Much of the future Amazon workforce will probably earn enough to afford units in Long Island City, where the average monthly rent currently clocks in at about $3,400, according to Citi Habitats. Amazon has said that the average annual salary at its new headquarters will be more than $150,000.
"If you put the math to it, if they are making an average of $150,000 a year, that means they’re willing to pay $3,500 a month. That’s what’s being offered now," Maundrell said.
The tech behemoth’s campus, however, will probably usher in a series of new restaurants and stores in Long Island City, ultimately giving the neighborhood a more active vibe, according to Grant Long, senior economist at StreetEasy. Long said, long-term, that may make the area more desirable and expensive.
"Rents are highly likely to go up, and at a faster rate than everywhere else," Long said.
Mayor Bill de Blasio has said the city will continue to create and preserve affordable housing in the area, which he hopes will protect people at risk of being priced out of their community. Currently, at least 1,670 new below market-rate units are slated to enter the Long Island City market over the next five years, according to Citi Habitats data.
Some housing rights advocates are skeptical the city will do enough to support vulnerable Long Island City residents. The city has committed to directing about half of the payments in lieu of taxes (PILOT) it collects from Amazon on public land over the next 40 years into an infrastructure fund reserved for projects in the Long Island City area, but even that projected $650 million may not be enough to protect locals, according to Lena Afridi, the director of economic development policy at the Association for Neighborhood and Housing Development, a nonprofit focused on creating thriving, equitable neighborhoods.
"What it’s going to do for cost of living for folks, not just as far as rents go, for middle income homeowners, for commercial tenants in the neighborhood — it’s going to have a huge ripple effect," said Afridi. "And something like a PILOT program isn’t enough to counter that."
With Sarina Trangle
Before Amazon announced its move to the area, Long Island City was already in the midst of a development boom. According to Citi Habitats, there are 60 multifamily buildings that are either under construction or planned that will open in the next four years that will have a combined 10,101 units. Below is a breakdown of those new apartments (with reported opening dates) that are currently slated to open:
End of 2018: 299 units, 100 percent market rate
End of 2019: 2,026 units, 88.3 percent market rate
End of 2020: 949 units, 86.41 percent market rate
End of 2021: 2,517 units, 46.21 percent market rate
End of 2022: 2,000 units, 77.50 percent market rate