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NEW SUBWAY LINE ALREADY IMPACTING HOME PRICES ALONG SECOND AVENUE

Real Estate Weekly

  •         NEW SUBWAY LINE ALREADY IMPACTING HOME PRICES ALONG SECOND AVENUE
Aerial view of the 2nd Avenue, Upper East Side, Manhattan, New York City. Tilt-shift effect applied

New subway line already impacting home prices along Second Avenue

The Second Avenue Subway line, long derided as fantasy by New Yorkers who had seen plans for construction stall and linger for decades, finally has an end date in sight — and it’s poised to shake things up for the Upper East Side.

Areas of the neighborhood became affordable again in the past few years, as more and more people left for sought-after enclaves further downtown and in Brooklyn and Queens.

Perhaps the most affordable area is Yorkville, between 3rd Avenue and FDR Drive, and bounded on the North by 97th Street and on the South side by 79th Street.

The T train, as the new light blue subway line will be named, along with an extended Q train line, will cut right through Yorkville along Second Avenue, providing much-needed relief for straphangers who take the 4,5 and 6 lines – some of the most overcrowded trains in the subway system.

View from inside the Second Avenue Subway tunnel in May 2014. Photo by Holly Dutton

 VIEW FROM INSIDE THE SECOND AVENUE SUBWAY TUNNEL IN MAY 2014. PHOTO BY HOLLY DUTTON

While some brokers are split on whether transportation can make or break a neighborhood, they agree that it can be an important influence.

“The Second Avenue construction has been a nightmare,” said Ana Weisberger, an agent with Citi Habitats who has done much of her business on the Upper East Side in the past four years.

Despite the headaches, she has seen residential prices rising in the last two years, including properties on Second Avenue. She’s seen a roughly 20 percent increase in prices among high-end properties, and a 12-15 percent increase in buildings further East from Second Avenue.

“That’s huge in my opinion, because construction is not even done yet,” she said.

Weisberger recalled a couple who bought an apartment on 82nd Street between First and Second Avenues for $499,000 in 2014. Similar apartments at the building are now being listed at $530,000 to $550,000.
The couple wanted to sell the apartment, but she talked them out of it.

Ana Weisberger

 ANA WEISBERGER

“If you want to buy there, I think you should hold off at least until the subway is done,” she said.
She pointed to condo building The Knickerbocker on 72nd Street and Second Avenue, where average price per square foot rose from 1,000 to 1,300 p/s/f in just a two year period, as a barometer of what’s going on the neighborhood.

Weisberger, who lives in the Hudson Yards area, is looking to buy in Yorkville herself this year.

“The Upper East Side has been a dream,” she said. “I wanted quiet, like East End Avenue and York Avenue, and the subway is just a plus. But I do want to get in before it’s finished.”

According to the MTA, Phase 1 of the Second Avenue Subway — an extension of the Q train up to 96th Street — is slated to begin this December, while Phase 2 is being fast-tracked by MTA officials, who are have been trying to secure funding for it.

While the subway has been under construction, traffic and scaffolding along the avenue has been a constant fixture. Once that is gone, the benefit for retailers who have been hidden will add another layer to the real estate scene.

And developers are paying attention, too.

Daniel Minkowitz, head of Mink Development, is building a luxury condo building on East 96th Street and Second Avenue. His firm purchased the site, previously a parking garage, in 2014, for $24 million. They are knocking down the parking garage to construct a 75,000 s/f property that will have 48 units.

“This project fills a huge gap in an underserved market with affordable luxury,” said Minkowitz in a statement. “We had vision. The Second Avenue subway is now becoming a reality and the low price we purchased the land for, in retrospect, now makes it a phenomenal deal.”

Julie Park, an agent with Level Group, has lived on the Upper East Side for more than 15 years. She lives at the Saratoga, a condo building at 75th Street and First Avenue, and has had a front row seat to the changes in the neighborhood.

Julie Park

 JULIE PARK

She first moved there in 2000, and the Second Avenue construction began at the same time she moved from a career in banking to one in residential real estate.

“It was at the height of the downturn, unfortunately, when they started the construction,” she told Broker’s Weekly. “It seemed that amid all the blasting and dust, I couldn’t give away an apartment along 2nd Avenue.”

She recalled a friend at the time who had to chop the price of her home almost 30 percent to unload it, and lost money in the deal.

“Now, anything in that same area is seeing premium built into the price, especially closer to the main hubs of transit,” said Park.

She’s seen prices accelerate rapidly in the past year — including the price of one bedrooms, which went from averaging in the mid-$700,000’s, to averaging in at $900,000.

“We are in a very strong market, with low inventory, so I think part of it is that the far Upper East Side has been undervalued over the past decade or two and people are starting to feel the lack of inventory downtown, and a lot of people are expanding their search criteria to include the Upper East Side, because you can still get value in the neighborhood,” she said.

According to Streeteasy, average price per square foot in Yorkville is $1,750, one of the lowest on the Upper East Side compared to Lenox Hill ($2,841), Carnegie Hill ($2,471) and the Upper East Side as a whole ($2,496). Only Upper Carnegie Hill, a 10-block geographic area between 98th and 110th Street along Central Park, had a lower average price per square foot ($1,628).

“I think there’s only room to go up,” said Park. “The worst is over, the blasting and major construction is completed, and people and sellers who have already lived through that can only benefit from the price increases we’ll see going forward.”

But it’s not just the addition of the new subway line that changed people’s minds – the popularity of apps like Uber and Lyft have made living in areas further from the subway seem not so isolating, said Park.

Thomas Guss

 THOMAS GUSS

That sentiment is echoed by New York Residence, Inc. founder Thomas Guss, who has been in NYC real estate since 2003. A native of Vienna, Austria, he primarily works with international clients, many of whom seek apartments on the Upper East Side.

“The subway alone doesn’t make or break an area,” said Guss. “The Lower East Side didn’t have a subway for a long time, but a lot of people decided it’s a cool place to live. As a result, the area became interesting. A lot of that might happen in Yorkville.”

Young people looking for affordable options in Manhattan have been finding luck on the far Upper East Side in the past couple of years, and the retail scene responds to that, he said.

While it’s clear that real estate prices are quickly rising and the subway is already bringing a renewed interest in the neighborhood, it remains to be seen just how much things will change.

“Now comes the subway, now you can get there faster than before, but the equation becomes, do you want to go there? You have to have a reason,” said Guss. “So now it’s interesting to see you have more restaurants coming up and more shops set up there, and of course the subway has some element to that, but I don’t think it’s the only driving force. I think young people want to find an area where they can do things to make the area their own.”