Partner, Senior Managing Director
I think [the Bushwick rezoning] is going to have a significant impact on the neighborhood as a whole. It’s going to promote private investment across every pocket of Bushwick. It may not double and triple land values, but I do think it increases values by 30 to 40 percent in certain areas, which will certainly accelerate transaction activity.
Bushwick’s Recent Performance
The first half of 2019 was relatively slow for Bushwick, where only 19 commercial transactions occurred through June 15. Annualized transactions are on pace to fall another 29% year-over-year, continuing a slide dating back to 2015.
Properties Transacted in 1H19
Bushwick Transactions Decline
Total 1H Transactions, 2009 - 2019
But DJ Johnston — a Partner and Senior Managing Director at B6 who focuses on the Bushwick area — sees some reason for optimism. He points to New York City's plan to rezone Bushwick, first unveiled in April, as a potential catalyst for longer-term growth. "I think over time, it's really going to change the face of Bushwick," said DJ.
Rezoning Increases FAR
The proposal is intended to promote affordable housing, renovate open space, and improve transportation. But DJ was also surprised by the “significant increase in density that [the city] is proposing” in certain pockets of Bushwick.
In a number of the newly defined zoning districts, as represented on the map, the allowable floor area ratio for commercial and residential uses would increase two to three times its current zoning allowance. Land in the C4-4D zones on Broadway, in particular, would be up-zoned to a maximum residential FAR of 7.2.
Proposed Zoning Districts
Substantial up-zoning along transit corridors on Wyckoff, Myrtle, and Broadway would make the neighborhood more attractive to large-scale developers. And with those projects come neighborhood amenities and additional retail options.
DJ sees land along the L and J-Z subway lines as investment opportunities moving forward.
I like areas like the Halsey L train for commercial development, and the Gates J/Z train for mixed-use development...those neighborhoods have character, strong upside fundamentals, and a good balance of product types that investors can capitalize on.
Partner, Executive Managing Director
I see Bushwick and Bed-Stuy as the closest comparisons to Harlem right now...we’re seeing similar growth and opportunities.
Harlem’s Recent Performance
The Harlem submarket got off to a hot start in 1Q19, with dollar volume topping $350M for the first time since 2016. Both dollar volume and transactions, however, tapered off in 2Q.
Still, property in Harlem continues to get more expensive on a price per square foot basis, topping $600 in 1H19.
Properties Transacted in 1H19
Harlem is Getting More Expensive
Avg. $/SF in Harlem vs. NYC, 2009 - 2019
Mouseover a line to show values
A Development Resurgence
And development activity in Harlem is turning a corner. David Chase — a 17-year real estate veteran who oversees the area for B6 — was a little surprised that East Harlem’s rezoning in 2017 didn’t induce more large-scale, development projects. “I expected more to be honest with you,” he said.
But according to B6's internal data, there are now 67 sites in the pre-construction or construction phase across Harlem.
Current Development Sites
Opportunities in Harlem
David envisions more investment opportunities in Harlem over the coming decade. Columbia University is finally making real progress on its planned expansion into Manhattanville, having already completed three buildings on the new campus. With the Columbia Business School slated to relocate to Manhattanville in 2022, West Harlem could be approaching a breakout moment.
You can see what's attracting [developers] to West Harlem...I think Columbia’s expansion plays the biggest role there. In West Harlem, you'll need housing for people who won't be living on campus...and that sparks interest for investors who are building and purchasing rental properties in the area.
Meanwhile, in East Harlem, New York City's plan for the Second Avenue Subway could have major implications for the neighborhood. After years of false starts, the city finally completed phase one of the project in 2017, stopping the line at 96th Street. The second phase promises to extend service all the way to Lexington and 125th Street in East Harlem.
“We're going to see activity in the coming months and years on this corridor,” David said, noting that B6 is already starting to represent property owners in Harlem along the proposed line.
Partner, Vice Chairman
Long Island City, Astoria, and Sunnyside — the three surrounding neighborhoods — had already caught fire. Amazon’s [plan for HQ2] was just the cherry on top. If you take the cherry out, they're still on fire.
Even as Amazon pulled out of its planned HQ2 in Long Island City earlier this year, commercial activity in the near vicinity ballooned. Dollar volume across LIC, Astoria, Sunnyside, and Woodside grew 35% in the first half of the year, driven in part by the sale of a 1.6 million square foot development site in Hunters Point.
Industrial Assets Drive Growth
Thomas Donovan — a Partner and Vice Chairman at B6 — has observed the Queens market since 1998. He sees a shift underway in the product type that investors are gravitating to. "Multifamily is slowing...but industrial is picking up the slack," he said.
He sees industrial assets as a key driver of growth across Queens.
Industrial Properties Transacted in 1H19
There’s Demand Beyond LIC
The growth isn't just relegated to select neighborhoods like Long Island City and Astoria. Annualized dollar volume across Queens is on pace to fall just short of $4.6B, in what would be the second-highest total this decade. And price per square foot has also increased substantially across most Queens neighborhoods.
Change in Price/SF, 2018-2019
“Everybody talks about Long Island City, but the borough is so dynamic that that's not the beginning and end,” Thomas noted.
Still, Thomas urges caution as we head into the latter half of 2019 in light of the new rent regulations. “I think we’re going to see a buyer’s market the next six to 12 months,” he said.
“Long Island City is still a good market, but this [rent regulation] is going to affect the whole city.”
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