When last we checked in on the Second Ave. real estate scene earlier this year, the residential market seemed to promise a good time to rent or buy for those who could wait out the construction. With rates dropping along the subway’s path, buyers who could hold onto their property would surely realize profits by late 2016, and renters, meanwhile, could find a cheap place to live for a few years, albeit one in the middle of a construction zone. But what of commercial real estate?
Today, Alessia Pirolo of The Wall Street Journal examined some recent commercial transactions along Second Avenue and find a few hearty souls willing to take advantage of low rates. According to Pirolo, retail rental rates have dropped by as much as 40 percent since construction started and some store owners are willing to gamble for the next four and a half years. “The rent was very attractive,” one owner said. “When we signed the lease, the construction was taken into consideration.”
As residents say they’ll support any local business willing to open amidst SAS construction, owners know that toughing it out for four years could pay dividends as the subway will bring a huge boost in foot traffic and business. Landlords, said one broker, could expect a bump of at least 20 percent from the pre-construction peak. “Private money always follows public money,” Jason Pruger of Newmark said. “Look at the High Line.”
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Will there really be a property value boost? I’m not so sure. Certainly, one could expect that there would be a boost in rents from construction conditions to post-construction conditions. But the upper east side is a bit weird in the sense that the development was premised on additional subway infrastructure that is only coming on line now. It’s hard to imagine that the upper east side will expand in population in response to the SAS. It’s already an almost continuous wall of high-rise housing. The SAS is better understood as a quality of life enhancer and relief valve than as a development incubator. You can see examples of the latter by way of the 7 Extension and the west side park. Perhaps you’ll see some marginal property value increase, but I wouldn’t expect anything readily perceptible. Also, because you have the Lex line now, commutes were always pretty speed on the east side, they are simply speedy on an overcrowded antique line. I suppose the canary in the coal mine would be property values on First Avenue and on York, but I wouldn’t expect much.
I think you’re completely undervaluing the impact SAS will have on Upper East Side property values, particularly east of 2nd Ave. Everyone in real estate that I’ve spoken with over the years echoed Pruger’s comment. There should be a significant boost in all areas. Retail rates will rise, rents will go up, and sales figures will increase as well.
The current UES market isn’t based at all on the promise of additional subway infrastructure. Maybe that was the case 50 or 60 years ago, but the market bump for the current SAS iteration has’t happened yet. And it will happen.
Exactly! The Texas Transportation Institute at UT Austin notes residential property values rise on average 40% when a rapid transit line opens. The bounce for commercial real estate is over 50%. Why is that? It’s ease of access for all, not just for drivers.
I think it’s probably much more complicated than any headline figure, but in any event it sounds like UT’s study is talking about prices in an area going from no access to some access. The UES is viewed as having subway access now (as inconvenient as it is for those living east of third ave., and has a ton of buses running up and down parallel routes. This is not akin to putting a light rail line, Denver style, into an area that has basically no current transit access.
I’m not referring to pricing, what I meant was that the UES was basically zoned on the premise that it’d have two lines. It’s more or less impossible to see greater development, at least below 96th, because it’s already an unbroken field of towers. With respect to pricing, I’d certainly pay more to have a second line, especially if looking to live east of say third avenue. But how much higher can prices go?? We’ll see (I hope!) what the difference will be, and directionally it’ll be higher, I just doubt it will be a dramatic change. Also, if the T is ever built out, you’d probably see a smaller premium provided to locations on Lex Ave. express stops, because they will no longer be the only preeminent locations on the UES.
No, population won’t increase significantly, but rents will. The UES east of 2nd Ave is very built up but rents are relatively low for Manhattan, because they’re so far from the subway. Once subway service is there all those depressed rents will go up to regular Manhattan-below-96th levels.
Troll comment: since SAS is going to take traffic away from the Lex, maybe the best places to develop are going to be along Lex in East Harlem and then everywhere in the South Bronx. The South Bronx’s subway ridership is well below historical peak, but because the Upper East Side is at or near the peak and there are no longer els to take off some of the pressure, it can’t be brought back up easily.
That is partly true. Population is slightly lower now than in the 50’s and 60’s, but jobs aren’t as centralized as it was then (more jobs away from Manhattan CBD). People living in East Harlem and South Bx, especially Blacks and Latinos are more likely to work locally (walk to work) or outside of Manhattan (reverse commute). Unemployment, underemployment, and non 9-5 jobs (non peak ridership) are also more common among this group in these neighborhoods. As gentrification creeps north, the population will bump up, but the AM peak ridership bump will be disproportionately bigger as the demographic moving in will have more traditional job hrs.