Investors May Proceed Cautiously for Queens Development Sites in 2016
Development site sales in Queens hit a snag last year and might encounter a rough patch in 2016.
Sales of such properties, including vacant land, industrial buildings and garages, modestly declined in the borough to $1.47 billion last year from about $1.49 billion the year prior, according to Ariel Property Advisors’ end-of-year report provided exclusively to Commercial Observer. And this year might be challenging for development site sales in Queens thanks to a whole host of factors.
Because of uncertainty surrounding “421a, and the price of land, I think you are going to see development site sales level off,” Daniel Wechsler, a vice president at Ariel, told CO.
Specifically, Mr. Wechsler pointed to pricing being affected at development sites in Queens’ priciest neighborhood, Long Island City, where properties averaged $235 per buildable square foot in 2015. The borough’s average was $154 per buildable square foot, a decrease from $165 per buildable square foot in 2014 (although still much higher than 2013’s $84 per buildable square foot).
“I think you’ll see a drop off in pricing of land in Long Island City,” Mr. Wechsler said. “Prices are astronomical right now. And development is a risky game.”
Meanwhile, the Queens investment property sales market as a whole continued strong growth with high demand in 2015.
Dollar volume of sales in the borough rose 20 percent to $4.38 billion last year from $3.65 billion in 2014, the report indicates. That was 57 percent higher than the $2.8 billion in 2013. And although the dollar volume increased last year, the total number of transactions fell to 688 comprising 925 properties last year from 728 deals and 947 buildings in 2014.
“With [soaring] prices in Brooklyn and Manhattan it’s almost forcing investors to look elsewhere,” Mr. Wechsler said. “In the past couple of years you are seeing bigger names in real estate coming to Queens.”
The top sale in the borough last year was private equity firm Blackstone Group’s purchase of the The Shops at SkyView Center mall in Flushing for $400 million from Onex Real Estate Partners. That transaction skewed the dollars and cents for commercial property sales, which increased 91 percent to $1.1 billion from just $557 million the previous year.
Another big deal the report highlights was Flushing-based developer Jia Shu Xu’s C&G Empire Realty’s $143 million purchase of a nine-parcel Long Island City development site from Citigroup, as CO previously reported. It was the largest sale of vacant land in Queens in 2015.
When it came to the sale of vacant land, as expected, Long Island City brought in the bacon for the borough in 2015. Of the $516 million spent acquiring vacant sites the neighborhood took the lion’s share with $308.7 million for 1.2 million buildable square feet.
Other notable mentions include Jamaica and Flushing, which saw more than $67 million spent on 721,700 buildable square feet and $12 million on 206,575 buildable square feet, respectively.
A surprise for the year was Elmhurst, where there were 18 transactions of vacant development sites, totaling $14.6 million for 128,667 buildable square feet.
“Elmhurst, much like Flushing, is becoming a destination for the international community,” Mr. Wechsler said. “There is is a much larger influx of the Asian community coming to Elmhurst.”