It’s been almost two months since we gave our predictions for real estate in Long Island City in the shadow of Coronavirus, what’s transpired so far? Well inspiring me to do an update so quickly, was an article late last week in The New York Times highlighting the number of new apartments available in LIC. Less inspiring have been the multiplicity of articles saying prices are going down/haven’t really gone down much/dire predictions for the future of NYC real estate/minimal sales & leases signed since the shutdown, blah blah blah – all of which contained spotty data and little of value.
The NYT article had facts, and best of all they were specific to LIC. Oh, and Greenpoint too. And the combination of available units and soon-to-be available units in both locales ain’t good – unless you’re a prospective buyer!
Or a prospective renter, which is a good place to start with my update because the pricing is more reactive to the immediate supply and demand. And lo and behold, in the two months since my prediction of a 15% drop in rental rates over the next year we are already halfway there. As I noted at the time, there were no concessions being offered by the large landlords in LIC. Now Avalon, Rockrose, and TF Cornerstone are all offering one month free on a 12-month lease = a 7.7% reduction.
I’m guessing the next shoe to drop will be when 5Pointz begins leasing, as the NYT states the building is ready and quotes 5Pointz owner Jerry Wolkoff as simply waiting for the right time from a comfort perspective. The absorption of 1,100 units situated at the halfway point between Hunters Point and Queens Plaza will put a damper on the pricing of all rental units in LIC. Oh, and there’s Greenpoint too.
Making one wonder why someone would want to buy an apartment in LIC? Price! We’re not there yet, not even close as there’s pretty much been a freeze in apartments showings = a freeze in apartment sales = zero capitulation by sellers. The first freeze is over, and in a reversal of order the next step is a significant reduction in pricing before sales will be transacted. Like two months ago I still may not have any clearer insight as to what course the Coronavirus will take, but armed with the actual data presented in the NYT I’m sensing that my 20-25% cut to pricing will be spot on as there is simply too much inventory available and soon-to-be in LIC. And in Greenpoint too.
A little math as gleaned from the article, if a 450 square foot studio at the Skyline Tower starts at $680k, that’s $1511 per square foot for the worst placed apartment in the building. A 20% reduction puts it around $1200 a square foot, and I think the developer should consider herself lucky to move the 600 remaining units in that development at that price scale. Newer projects won’t fare any better, and no reconfiguring for Covid living will bring in buyers, only a reduction in $$$. Remember, in 2020 there’s always Greenpoint.
What The Coronavirus Has Done To Development – “The pandemic paused residential construction and stalled sales. Now developers in Long Island City and Greenpoint are scrambling to bounce back”