Moving into 2016, we continue to see a slower sales pace in Queens. As I’ve noted previously, multiple factors including the 421-a program expiration, global market uncertainty, and the impending market peak have played a part in the cautious approach of market players. Before the expiration of the 421-a program however, 7,781 building permits were filed in NYC December, including 2,023 permits in Queens. With the 421-a expiration, we will likely see a larger wave of commercial development. Without the tax break, developers lack an incentive to build affordable units or residential units as a whole, especially condos.
There have been staunch opponents of the 421-a program, including Michael McKee of the Tenants PAC in NYC, who was quoted by the Gotham Gazette saying the expiration of the program is a good thing moving forward because of its “absurd” inefficiencies. The Gotham Gazette also stated that research has shown that the 421-a program actually only produced one affordable unit for every $833,000 in tax breaks.
However, there are also many supporters of the program calling for its renewal. Mayor de Blasio has a large-scale goal for affordable housing in NYC, and that goal won’t be reached without the aid of developers. For now residential development growth is expected to slow down, but in response we expect to see the property values of properties holding 421-a abatements increase due to the decrease in supply.
Despite all of the different economic factors affecting the city recently, the greater Flushing market has not skipped a beat. The area continues to thrive on almost every measurable scale. In fact, according to Assemblyman Ron Kim, Flushing produces the highest number of jobs in all of New York City. With small businesses leading the way in downtown Flushing where there is very little to no vacancy on the Main Street corridor, and its immediate side streets.
There isn’t a neighborhood in Queens the growth of which compares to that of Flushing over the past few years. Residents are well aware of the extensive growth of the neighborhood, and they want to make sure it is scaled and managed efficiently. The Flushing 2050 Community Building Initiative was recently launched as a long-term visioning process to help the Flushing community flourish. Along with the Flushing Chamber of Commerce, Flushing 2050 has set an initial goal of creating 1,000 new affordable housing units in the next 10 years and creating 1,000 new jobs in the next five years.
In addition to leading the economic growth in Queens, Flushing has become a mega-development mecca. Notable developments include SkyView Parc, Fulton Square, Flushing Commons and the Victoria Towers. Beyond the residential market, the office, retail and hotel segments have seen demand skyrocket in recent years. The growth of the city has also pushed north across Northern Boulevard where we have seen development sites commonly trading for above $300 per buildable square foot. The development capacity of the community might increase even further due to the rezoning plan Flushing West Neighborhood Study. The study aims to preserve and create affordable housing, foster jobs and economic opportunity, invest in services and infrastructure, and promote growth of livable neighborhoods. The plan has been in the works for several years, and its premise is to take the heavily polluted industrial waterfront of west Flushing and turn it into a clean mixed-use development with some open space included.
Another large-scale landmarked development site that has had years of background planning, the RKO Keith’s Theatre on Northern Boulevard, is ready for sale. Cushman & Wakefield has been retained on an exclusive basis for the sale of the property that includes approved plans and permits as well as a 421-a tax abatement qualification. The pre-qualification for the 421-a abatement is an incredibly unique advantage for developers following the expiration of the abatement program in early January. The approved plans include more than 300,000 square feet of residential space, about 25,000 square feetof retail space, and over 15,000 square feet of community facility space. As the growth of Flushing pushes through Northern Boulevard, this development will only bring more national credit tenants to the area and create even more jobs. The site is in a prime location at the intersection of Main Street and Northern Boulevard and will easily take advantage of the rising retail and residential rents in the area.
Flushing has built itself an unstoppable real estate giant and will continue to buck the trend, not allowing any economic factors to stand in its way.