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As seen in
Sunday,
August 13, 2000
Commercial Property / Long Island
City, Queens
Crossing the Queensboro Bridge as a Resettler
by JOHN HOLUSHA
Astheir lease drew to a close at 160-170 Varick Street on the
lower west side of Manhattan, executives of Colahan Saunders
Corporation, a commercial printing company, knew they were going
to have to move. Their landlord, Trinity Church Real Estate,
was converting its portfolio of buildings from largely industrial
uses to offices, at rents industrial tenants could not afford.
"We saw the handwriting on the wall," said Peter F.
Burke, Executive Vice President of the family-owned concern,
which has been in business for more than 100 years. "Trinity
was changing its flavor, and we didn’t expect our lease
to be renewed."
After searching for possible locations in the entire metropolitan
area, Colahan Saunders settled on the Long Island City section
of Queens, buying a building at 47-01 Van Dam Street a few blocks
from Queens Boulevard.
With vacancy rates in Manhattan near record lows and rents spiking
upward, Long Island City, with its proximity to the heart of
the city, good transportation links and sharply lower rents,
is functioning as a destination for companies being squeezed
out of Manhattan and for those that need space to expand.
The space squeeze in Manhattan is responsible for the blossoming
of the Jersey City waterfront on the west side of the Hudson
River as companies like Goldman Sachs Group and Chase Manhattan
Bank shift back-office jobs to the less costly buildings there.
But the Queens area on the eastern bank of the East River has
an advantage that the New Jersey location lacks: it is within
New York City. For some city residents that can be an important
consideration.
"We could have bought a building in New Jersey for half
as much as this one, but we would have lost a lot of employees,"
said Peter D. Colahan, the President of the printing company.
Because they stayed in the city, he said, only one of the company’s
75 employees declined to make the shift from Manhattan. The
fact that so many employees remained helped to keep the operations
of a company that runs 24 hours a day running smoothly.
Long Island City has long been an industrial area that also
served as a basement for Manhattan, holding warehousing and
distribution centers for retailers like Macy’s, Bloomingdale’s
and Gimbels. But now, office uses are taking the place of factories
and warehouses, it is changing.
Jeffrey A. Bernstein, a managing direct of Insignia/ESG, a big
brokerage and real estate services company, said the situation
in Long Island City today is similar to that in Midtown South
in Manhattan two decades ago. "I started in Midtown South
20 years ago, taking industrial properties and repositioning
them for offices," Mr. Bernstein said. "The same dynamic
is at work in Long Island City today, and service companies
are coming out of Manhattan."
He said he is marketing a building at 34-09 Queens Boulevard
that was once a factory that made Breyer’s ice cream to
office tenants. The asking annual rent in the renovated building
is $25 a square foot, about half of what comparable space would
cost in Manhattan. Another nearby building, at 32-02 Queens
Boulevard, formerly a home to garment manufacturers, is similarly
being offered to office tenants.
Despite the savings in real estate costs, he said, the East
River remains a barrier to many Manhattan firms, albeit a psychological
one, since the area is only a few minutes away from Midtown
by subway or the Queensboro Bridge, at 59th Street.
To help overcome that barrier and avoid getting lost on Queens
streets, Mr. Bernstein said, he typically arranges for clients
to meet him at Grand Central Terminal and take the subway. "We
can be at the buildings within seven minutes," he said.
One advantage that Long Island
City has over downtown Brooklyn as a location for office development
is that it can serve as an adjunct of Midtown rather of downtown
Manhattan, said James Meiskin, the President of Plymouth Partners,
a tenant’s broker. He noted that Midtown Manhattan has
roughly 250 million square feet of office space compared with
100 million square feet downtown.
The
development of downtown Brooklyn’s Metrotech complex
was largely driven by Wall Street companies in downtown Manhattan
shifting back-office jobs to the Brooklyn location, which
is also only a few minutes away by subway. Mr. Meiskin said
that Long Island City could become Midtown East, in much the
same way Midtown South was transformed earlier.
Long Island City’s prospects for development
have looked brighter in the past, only to be dimmed by a sharp
decline in the Manhattan market. The company then known as Citicorp
completed a 50-story, million-square-foot tower there in 1989,
but it stands alone today in an area of low-rise loft buildings
because the recession that followed the stock market collapse
of 1987 made space available at low rents in Manhattan.
One project that was hit hard by the competition from Manhattan
was the proposed International Design Center in two renovated
factory buildings on Thompson Avenue. It was to have been a
center for design companies who could not afford Manhattan rents.
"By the time the buildings became available, the concept
never really took off," said Michael A. Barak, who represents
a group that recently acquired the property. Renaming it the
Queens Corporate Atrium Center, the new managers recently rented
300,000 square feet of space to MCI Worldcom, a telecommunications
company.
Mr. Barak said that calls about available space were now coming
from companies that do business with MCI Worldcom and from city
agencies, such as the Department of Transportation and School
Construction Authority, that are also situated there.
The possibility of using low rents to lure tenants out of Manhattan
is behind other projects in the area. A group led by Marvin
Schnee of Schnee Realty Company in Cedarhurst recently bought
a nine-story, 95,000-square-foot building at 42-15 Crescent
Street at the foot of the Queensboro Street bridge. The group
is renovating the lobby, but the main attraction is to be annual
rents in the low $20’s per square foot.
"We are looking to get people from Manhattan who are paying
$45 to $50 a square foot who like the sound of $25 a square
foot," he said.
Some brokers say that the conversion of industrial buildings
to office use may be a good thing for the landlords involved
but that it is a threat to the warehouse and mechanical companies
that have cherished their proximity to Manhattan.
Close to 2 million square feet of industrial space has been
converted to offices recently, and industrial rents have doubled
in the last 18 months, according to Franklin Zuckerbrot, Executive
Vice President of Sholom & Zuckerbrot Realty, a brokerage
company. "Companies that were paying $4 and $5 a foot are
now facing $9 to $12 a foot," he said.
One prominent landlord in the area, Irwin Cohen, the Chief Executive
of ATC Management, said that new companies do not necessarily
have to drive out industrial tenants. The trick is to combine
new skills, such as computer-aided design, with the light manufacturing
already in the area.
Mr. Cohen, whose properties include a 10-story, million-square-foot
building at 30-00 47th Avenue known as the Factory, said that
one of his tenants is a jewelry manufacturer that is planning
to bring out a new line of merchandise to be sold directly over
the Internet, rather than through retailers or television.
He said software producers could make agreements with the jewelry
company not only to assist in designing the new merchandise,
but also to help develop the Internet marketing system and Web
sites. "They are going to sell directly from the factory
to the customer, so their prices can be lower" he said.
New York City is the center of jewelry manufacturing in this
country, he said, and developments like this one can help keep
it that way. He said the rising rents in Manhattan, where he
operates the Chelsea Market complex at Ninth Avenue and 16th
Street, will help promote these types of alliances.
"In Long Island City," he said, "you can do manufacturing
and e-commerce at the same place."
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