Residential Development Fuels Commercial Demand in Queens
Long Island City’s evolution is being helped by pre-leasing of New Tishman-Speyer office complex
In the past several years, real estate players have taken hold of Long Island City’s older factories and warehouses and turned them into offices and light-industrial space. But the pre-leasing of more than half of Tishman’s $700 million project—an entirely new complex of buildings—suggests an important advance in the Queens neighbourhood’s commercial evolution.
Demand for high-quality offices and retail space in Long Island City is being fuelled in part by the 11,000 condominiums and rental apartments that have been built there over the past decade. Another 22,000 apartments are either planned or being built.
“We are in the infant stages of commercial development in Long Island City,” said Evan Daniel, executive vice president of the Commercial and Investment Property Group for ModernSpaces LLC. “You have to have the people first to have the commercial and retail survive.”
Tishman, which is also putting up three apartment towers in the neighbourhood, announced this summer it was building the 1.1-million- square-foot office and retail project. It has investment from partner Qatari Diar Real Estate Co., the real estate arm of Qatar’s sovereign-wealth fund.
Plans call for two 27-story office towers with a 1.5-acre park atop a four-story retail building at Queens Plaza South and Jackson Avenue. The retail building will be 43,000 square feet and include a food hall, a fitness centre and restaurants. Construction is set to begin next year and the finish date is 2019.
Shared-office space giant WeWork will set up a 250,000-square-foot location, and Macy’s Inc. plans to take about 550,000 square feet. Macy’s said it didn’t have specific plans yet as to which business units would occupy the space in 2020. A spokeswoman noted the retailer already has a presence in Long Island City—a studio where Macy’s photographs its merchandise is in a nearby redeveloped building called The Factory.
In the past few years, other fashion industry companies have been moving some operations to Long Island City. They often are leaving more expensive Manhattan rents and taking advantage of city tax credits for relocating to targeted areas.
New York City also has played a role in Long Island City’s maturation. In 2003, Tishman was able to purchase the options from the city and a private seller to develop the Long Island City sites. On part of the sites, Tishman already has developed and sold a 700,000-square- foot office building that is adjacent to its new commercial complex.
The city’s Economic Development Corporation also is trying to boost the area’s office and light-production space with a request for proposals to develop two waterfront properties.
Tishman’s trio of apartment towers under construction are across from the commercial complex. Developed with H&R Real Estate Investment Trust, the buildings will have 1,900 apartments and a 2.5-acre private park.
Indicators suggest a healthy demand for office space in the area. Long Island City’s office inventory stands at about 13 million square feet, according to real estate services firm Cushman & Wakefield.
In the second quarter of 2016, the overall vacancy rate fell to 7.7%, a drop from 9.3% for the same period last year. The vacancy rate for class A (or high-quality) office space was 6.4%.
‘It wouldn’t surprise me if the people who work in our office development live in our residential development,’ said Rob Speyer, CEO Tishman Speyer.