For years, the stretch along Second Avenue between 72nd and 96th streets was a construction zone as the city awaited the completion of a subway stop that had been promised for decades. But now that the Second Avenue subway line has been up and running for a year and a half, the area’s property owners are starting to reap the benefits.
Wikipedia
Inside the Second Avenue Subway stop
In excess of 1,800 new rental units are in the pipeline for the Upper East Side east of Third Avenue, according to data provided to Bisnow by Halstead Property Development Marketing. Nearly 500 condos are also in the works, Halstead’s data shows.
Big-name developers are already banking on the area. Extell Development, for example, is marketing condominiums at the Kent, an 83-unit building at 95th Street and Third Avenue, where a penthouse is asking $19.9M. At Anbau Enterprises’ Citizen360, which is at 89th Street and First Avenue, units have been selling at an average of around $1,800K per SF, according to StreetEasy. At Magnum Real Estate’s 389 East 89th St. rental-to-condo conversion, a studio is priced at $800K, while a penthouse is listed at $4.8M.
“[The Second Avenue Subway] is a game-changer for the Upper East Side,” said Stephen Kliegerman, the president of Halstead’s parent company, Terra Development Marketing. “We’ve seen a great increase in traffic, not just showing up, but buying.”
With sleek new rentals and apartment buildings starting to rise, the new subway up and running, and the possibility of thousands of new people coming to fill brand-new residential space, sources said the commercial real estate around the area is starting to flourish.
“There was a tremendous amount of [retail vacancies] during the construction,” Lee Associates NYC’s executive managing director, Richard Kave, said. “A lot were negotiating concessions from the landlords, and some business got to the end, but couldn’t get further.”
More than half of the businesses in the construction area closed or relocated between 2010 and 2016, according to the Manhattan Chamber of Commerce. Kave, who lives at East End Avenue and 85th Street, recently closed a deal for a new Thai restaurant to move in at 1611 Second Ave., across from the 83rd Street subway station. Further up Second Avenue, between 84th and 85th streets, he said he is in negotiations on a deal for a craft beer tasting room and store. Nearby, at 84th and Second Avenue, he is brokering a deal for a dog care company to take around 2,500 SF of retail space. Kave said that retail rents still vary in the area, but certain pockets have been significantly impacted by the new stop.
“That whole 86th Street corridor has skyrocketed, you can see asking rents as high as $400 per SF,” he said. For side street locations, he said, deals are being done at around $100 per SF. “There are thousands of apartments that are going to hit the market up there … that’s a lot of customers. It’s a lot of beer, dogs and restaurants.”
Without the Second Avenue Subway, the easternmost part of the Upper East Side was considered a cheap alternative for rents and buyers who didn’t mind the extra walk to the Lexington Avenue Subway lines.
Courtesy of Extell Development
The lobby of Extell’s the Kent in Yorkville
Maybe not for much longer, Cushman & Wakefield Director Brett Weisblum said.
“At some point everything is going to get developed,” he said. “All the air rights are going to get developed. It’s just a question of when.”
Extell, for one, is doubling down in the area. The Gary Barnett-led firm is in the process of creating a 10-parcel assemblage at First Avenue between East 79th and 80th streets with more that 350K SF of buildable SF. The firm is reportedly in contract to pay nearly $36M for more than 100K SF of air rights for the development.
Extell has not publicly linked that assemblage to the subway development, but the director of sales at The Kent, JP Forbes, said in a statement to Bisnow that the area is “experiencing a new neighborhood renaissance aligned with the Second Avenue subway.”
The Q train has “helped to further strengthen the neighborhood’s appeal for our residents and other prospective buyers,” he said.
PAX Brooklyn
A rendering of Vitre
C&W Executive Managing Director of Investment Sales Tom Gammino agreed that the new subway has unlocked interest, but in terms of investment sales prices, the value of the stop has long been built into the pricing. And while rents did rise significantly in the Yorkville area last year — spiking 4% in 2017, Bloomberg reported earlier this year, even as citywide rents declined — Gammino thinks that is more because the rentals in the area are catching up after a stagnant period during construction.
“The rental market in general has been softening for the last couple of years,” he said. “Because of the Second Avenue Subway [construction], the rents were falling more than they ordinarily would.”
Wonder Works CEO Eric Brody, who developed Vitre at 302 East 96th St., where condos are asking an average of $1.7M, according to StreetEasy, said targeting the area wasn’t “brain surgery.”
“[The new subway] changed everyone’s perception on what’s occurring up there,” he said, adding that seeing retail and fitness offerings springing up will help with sales. “There is a lot of density. There are some pretty tall buildings. I’m obviously not the only one with that game plan.”
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