From the January issue: Barring any unforeseen catastrophe, the Upper East Side should have a new subway line in 2017. As of late last month, the $4.4 billion project — which has been nearly a century in the making — was set to open on New Year’s Day.
“If we’re not done January 1, I will stand up and say we failed to make the deadline, and I’m disappointed,” said Gov. Andrew Cuomo, who personally visited the new stations and oversaw details. But whether construction crews actually make that deadline or not, the new transit line is already being factored into the UES market, according to experts. Brokers are already seeing price hikes on condos, and developer Ben Shaoul, who earlier this year launched sales at 389 East 89th Street, told The Real Deal that he is shopping for more sites in the neighborhood. For our second web installment of the Q&A, we turn to Ben Shaoul of Magnum and Amit Doshi of Besen & Associates.
Ben Shaoul
Ben Shaoul
Founder and president, Magnum Real Estate Group
There are a slew of luxury condo projects coming up on the Upper East Side — 12 of them east of Lexington. You currently have a condo project at 389 East 89th Street. How much does the Second Avenue Subway opening help sell the units?
What slew? I don’t see much coming at all, as I don’t see construction loans coming. But with that said, the Second Avenue Subway has been a major selling point on the Upper East Side, which once completed will provide residents with easy access to Downtown for the first time in history.
How quickly are your units selling right now?
The traffic and sales velocity at 389 East 89th Street is evidence of how well buyers are responding to the accessibility of the neighborhood, as the building is approaching 50 percent sold with an average of 40 appointments per week.
Which condo projects are best positioned to sell in this market?
What sorts of properties are in high demand?
Properties that are priced well at the $1 million to $3 million range while maintaining the element of luxury, as we have done at 389 East 89th Street.
Where do you see the market six months from now once the Second Avenue subway opens?
I see much of the $1 million-to-$5 million market all being sold in the next six months. I think the media has gotten it all wrong when they state that there is too much inventory coming to market. I see us shifting from a buyer’s market to a seller’s market at this price point.
Are we seeing a demographic shift for the neighborhood? What types of people are moving in and considering the neighborhood now?
We’ve seen interest from both current Upper East Side residents as well as those who potentially would not have considered the neighborhood before. There has been a variety of different people migrating to the area, from young professionals to families to empty nesters.
Do you have any other projects in the pipeline in the neighborhood?
Currently 389 East 89th Street is our sole Upper East Side project, but with how successful this building has been, we are looking in the area and have identified a few other sites that could fit with market demands on the Upper East Side.
Amit Doshi
Amit Doshi
Executive Director, Besen & Associates
Extell last summer closed on a $93 million contract to buy a former Gristedes supermarket at 350 East 86th Street. What kind of development interest is there right now in the Upper East Side? Do you expect to see more projects in the pipeline following the opening of the new subway line?
There is interest in Streets Such As East 86th Street and East 79th Street. No developer can go wrong on cross sections along major avenues. Developers are more and more bullish, but the Upper East Side is for a select category of owners and investors. The younger single crowd is moving elsewhere and finds the Upper East Side too staid for their taste.
Where do you see the condo market moving six months from now?
Six months is too short a period for a defined change, but if the buyer financing for condos opens up a bit more, there is going to be a ton of aggressive buyers, both foreign and domestic, for all segments of Manhattan and fringe areas of New York City. There is also a ton of $2,000-per-square-foot condos in the pipeline and as product available in today’s market. The developer has to create a signature product to distinguish themselves from others. Ultimately, the end buyer is the winner, especially if you are thinking long-term, and one should be.
What effect will the new subway line have on retail? What are retail rents right now, and where do you see them moving in six months?
Retail Rents Vary From Madison Avenue to First Avenue. On Madison rents can fluctuate from $600 per square foot to $300 per square foot, while other avenues range from $300 per square foot all the way down to $100 per square foot. Frontage, corner, proximity to transportation, pedestrian traffic are factors. Rents have suffered due to the subway construction, and those rents will come back up slowly but surely. Corners and location close to main intersections are about $200 to $300 per square foot; the rest fluctuate from $100 to $200 per square foot.
Perception of where the economy is heading is a big factor in determining where rents are headed, but one can safely assume 5-6 percent increase in the next two years. There is still a vast amount of space available throughout New York City to be absorbed before rents move up into the double digits.