Alive And Kicking: LIC Brokers, Developers Tout Queens Office Market Despite Amazon Snub
The Long Island City real estate community considered Amazon a shot in the arm for the neighborhood’s office leasing market. But with the tech giant now yesterday’s news, locals say the reasons Amazon chose the area in the first place still apply.
Last year, Long Island City had its slowest leasing year since 2015, with no leases larger than 100K SF signed, according to Cushman & Wakefield. Overall vacancy is at 17%, per the brokerage’s latest figures, and it's even higher for Class-A buildings, which have a vacancy rate of nearly 25%.
Amazon’s plan to build a new headquarters on Long Island City's waterfront was expected to reshape the area as a technology hub, and finally establish the outer boroughs as a legitimate home for major corporations.
But with HQ2 now well and truly dead, office developers, brokers — ever the optimists — are taking a glass half-full approach.
Long Island City buildings still come at a discount compared with office space in Manhattan, they say. There is still a rapidly growing residential community there and the tax breaks for companies are attractive — even if some tenants still won’t leave Manhattan.
“We are here, we are alive and kicking after the events in February,” Savanna Managing Director Andrew Kurd said Thursday morning at the Long Island City Partnership's annual real estate breakfast, referring to Amazon’s Valentine’s Day NYC breakup announcement.
Savanna, which has owned One Court Square since 2014, had a signed letter of intent with Amazon to take more than 1M SF at the building while the tech giant built its new campus.
Citigroup will vacate the office tower next year, and with Amazon no longer leasing space, Savanna once again has more than 1M SF to fill. The founder and managing partner of the company, Chris Schlank, said publicly last month that it will “take a very long time to repair the damage,” of the Amazon deal going south.
“The silver lining, if there is one, is that the entire Amazon experience put Long Island City on the global map — and it put One Court Square on the map,” Kurd said. “When a tenant like Amazon commits to an area and a building, it adds credibility. We’ve seen since February about 2M SF of touring activity at One Court Square.”
St. Louis healthcare company Centene Corp. is reportedly looking at taking 500K SF in the building. Kurd did not confirm that but said the company expects to be announcing major deals soon.
“We hope to announce a couple of large transactions that will prove out what everyone believes … that the fundamentals are there,” Kurd told the audience, though he declined to comment to Bisnow on the reports of the Centene lease, or any other deals.
“The entire process between November and February was a great marketing tool for the entire neighborhood,” he said.
When Amazon announced it had canceled its Long Island City plans, members of the real estate community said there was no doubting sale deals would collapse and that land sales would dip.
Office leasing brokers, however, say the market remains healthy, and agree Amazon’s choice of the area following a widely publicized search has drawn attention to its benefits.
Long Island City cheerleaders point to Estée Lauder’s decision to add an additional 100K SF to its lease at Brause Realty’s Brewster Building and Macy’s call to increase its lease at Tishman Speyer’s 1.2M SF The JACX by 300K SF this year as proof there is still strong interest in the neighborhood.
“Landlords in Queens are more flexible than other landlords in the New York City area,” Lee & Associates New York Executive Managing Director and principal Kenneth Salzman said in an interview, noting leases like NewYork-Presbyterian and Weill Cornell Medicine's 15-year deal for a 28K SF practice at The JACX and Tri-County Care’s full-floor, 17K SF lease at the Lion Match building.
“Long Island City is a true live-work-play environment that is very inviting for technology-driven companies hiring a millennial workforce," he said.
Cushman & Wakefield Senior Managing Director Joseph Grotto said the publicity generated from Amazon drew more attention to the incentive packages that any company can receive by locating in the borough.
The Relocation and Employment Assistance Program incentive, for example, could ultimately mean a 30% to 50% discount on comparable space in Manhattan, Kurd said.
Rents at One Court Square come in at around the mid-$60s, he said, but once the incentives are applied it works out to be closer to $40 per SF. In Manhattan, asking rents reached an average of nearly $77 per SF in the first quarter of the year, a new record, according to Colliers International.
“I believe Amazon really put Long Island City on the map for more companies and people to be inquisitive … There are a lot of people and brokers that don’t fully understand the economic incentives that are available,“ he said. "Amazon would have been that adrenaline shot … [But Long Island City is] still growing and expanding."