If you ask Evan Daniel, executive vice president of the commercial & investment property division of Modern Spaces, going all-in on an unknown quantity is a smart move.
Daniel took a diving leap into the Long Island City commercial real estate market just under a decade ago.
He had never heard of this little corner of Queens. Now he’s working in what is shaping up to be the city’s hottest new market.
Daniel told Real Estate Weekly, “The only existing development site in LIC in 2006 was Queens West. Everything else was just a pipe dream. There was nothing.”
Now LIC is viewed by many as one of the prime candidates to absorb the unceasing demand for both commercial and residential space.
Following amendments to the zoning laws in 2001 and in 2005, the table was set to bring commercial and residential density to a once over-looked sector of a tertiary borough.
“Long Island City is no longer just a place where people go because they want to be close to Manhattan. It’s going to have the big-box retail, it’s going to have the small retail. It’s going to have the restaurants and entertainment,” said Daniel, who is currently marketing a 102,670 s/f former DeNobili cigar factory, which is expected to fetch around $30 million.
“Frankly, I expect a heck of a lot more. I heard this was going to be a mixed use district and we’re seeing the fruits of that. We’ve just scratched the surface”
Daniel is not the only one who isn’t surprised. “Clearly Long Island City is booming,” chairman of Cushman & Wakefield New York investment sales, Bob Knakal, told Real Estate Weekly.
“What everyone was anticipating 20 years ago is actually happening today. There have been 8,000 apartments that have been built and are presently occupied. There are 19,000 apartments that are either being developed or are in the planning stages.”
But the bulk of Knakal’s focus is on one property in particular. With his team tapped to sell the tallest tower in the borough, the Citicorp Building, Knakal is expecting to move the property for about $600 million. It sold for about $500 million in 2011 and increased residential offerings should only help him meet or exceed the current asking price.
The 1.5 million s/f Class A office and retail building may soon to be home to storefronts that Knakal concedes the area “desperately” needs.
Daniel feels that the relatively meek retail offerings of LIC are headed for brighter days and said that both “high end and middle class” types of stores will be in the area shortly.
Knakal seems to agree. “We have a ton of interest from every corner of the globe and locally, too,” he said. “We’re expecting an excellent result,” he added pointing to the “remarkable” quick commute that LIC offers to those who are looking to both work and play in Manhattan.
“The area is extraordinarily viable,” he added. “If you look at what’s happening to LIC from the roof of One Court Square (address of Citicorp Building), buildings are popping up like fast-growing vegetation.”
A tour of The Factory verifies the viability that Knakal sees. The open, refurbished industrial floor plans of the 10-story, one million s/f building offer the trendy start-up vibe that is coveted in Chelsea but at a non-Manhattan price. It also offers tenants something that Manhattan-based home simply can’t: a view of the skyline.
The offices range from just over 3,500 s/f in the smallest of the units and up to 80,516 s/f in the largest.
“It’s basically a Chelsea-type building without a Chelsea type price,” said Brian S. Waterman, vice chairman of Newmark Grubb Knight Frank and part of a team handling leasing at The Factory that includes Howard Kesseler, Brian Waterman, Jordan Gosin and Brett Bedevian.
The former Macy’s warehouse was constructed in the 1920s. Ownership, a partnership between Atlas Capital Group and Square Mile Capital, is in the midst of a $20 million capital improvement program that includes a new building entrance, refurbished lobby, new public corridors, new restrooms, new pre-built suites and new building amenities. The building is WiredScore Silver Certified and has already attracted several tenants from various sectors, including TEI Group, an elevator solutions company, to a nearly 23,000 s/f lease.
Gwynnie Bee, an online clothing rental subscription service for women, leased a 12,702s/f pre-built suite on the fifth floor. The new pre-built comes standard with scarified and sealed concrete floors, 12 ft. ceilings, high efficiency lighting with occupancy sensors, two glass fronted conference rooms, a pantry with stainless steel appliances, and new windows with low-e glass and postcard views of the Manhattan skyline. Gwynnie Bee was represented by Robin Fisher and Christie Bennett from Newmark Grubb Knight Frank.
Applied Research & Consulting (ARC), a public opinion polling, market research and data analysis firm is moving to a 3,567 s/f space at The Factory from West 13th Street in Manhattan. ARC was represented by Haley Fisher and Michael Blanchard from Cushman & Wakefield.
“It has seen a breadth of potential tenants from TAMI, to non-profit, to financial,” said Waterman while discussing who else The Factory is currently attracting. “It’s got a lot of traction right now.”
The building also comes with several perks for tenants, including indoor parking, ample loading docks, shuttle service to the subway and the LIRR, and approximately 12 ft. ceilings on most floors.
“It’s hard to predict,” said Waterman when asked if LIC will soon shed its affordability advantage and join the ranks of Brooklyn, which went from cheap alternative to in-demand hotspot.
“When will the demand outpace the supply?” He asked before saying that more development is still needed in the area before an accurate reading of how the supply will measure up to future demand can be made.
Daniel feels that while prices will certainly rise in the area, LIC is not yet ready to be compared to Brooklyn and it may never be.
“It’s its own entity. There’s no question that it’s growing and it’s getting more expensive to live in and invest in,” said Daniel. “But there’s a pace to everything. Manhattan is always going to be more expensive than Brooklyn and parts of Brooklyn are probably always going to be more expensive than parts of Queens.”
The interest in the area has done little to suggest that it will be a bargain forever.