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As seen in
New York Business
October, 2002
SPECIAL REPORT COMMERCIAL REAL ESTATE:
Long Island City faces long odds in leasing up
Hard to compete with Manhattan office deals,
space
by DANIEL GROSS
Earlier this year, Competitrack, a Manhattan-based market research
company, was rapidly outgrowing its two locations in the Flatiron
district. And the company's long-term below-market leases were
slated to expire in early 2003.
"We considered moving to Virginia. We looked at Harlem, upstate
New York and all over Manhattan," says Steven Rothman, controller
at Competitrack Inc.
Sold on an incentive package, the company settled on Long Island
City, Queens. Competitrack secured a 12-year lease starting
at about $23 per square foot - far less than the $40 per square
foot it was offered in Manhattan. The Relocation and Employment
Assistance Program, which essentially refunds $3,000 per employee
from city taxes for up to 12 years, was also a sweetener.
The problem for Long Island City is that companies like Competitrack
are the exception rather than the rule. While it has been long
expected that Manhattan-based companies would flood into the
rezoned district over the Queensborough Bridge, the flow of
tenants has been more like a trickle.
Decreasing need
With the abundance of deals now
available in Manhattan as a result of the slow economy, Long
Island City has lost much of its appeal. "Clearly, some large
blocks of space have become available in Manhattan, and to an
extent that decreases the need for a company to relocate to
Long Island City," says James Meiskin, president of tenant representative
firm Plymouth Partners, Ltd.
Adding to the area's woes is the absence of offices ready
for immediate occupancy. "Here, more than anything else, it's
been the lack of Class A office space already built that has
been a problem," says Gayle Baron, executive director of the
Long Island City Business development Corp.
The post- 9/11 economy has hindered further development in Long
Island City as it becomes more feasible for companies to stay
in Manhattan. Last March, Dreyfus Group, believing the climate
for development was unfavorable, pulled out of plans to build
a large office building on a site on Jackson Avenue controlled
by Manhattan-based Arete group.
Long Island City's outlook hinges on whether a couple of leases
signed by big-name tenants will lure others. In the past 12
months, the museum of Modern Art and MetLife have established
high-profile footholds in Long Island City.
Most of that activity involved refurbishing existing buildings.
Last fall, MetLife moved 900 administrative employees into the
former Brewster Carriage building, which Brause Realty had renovated
and turned into 1 MetLife Plaza. Brause Realty is currently
constructing an adjacent, 282,000-square-foot, 12-story building,
which will connect to 1 MetLife Plaza and accommodate further
900 MetLife employees. It is slated for completion in June 2003.
The Museum of Modern Art moved to Queens last June for three
years, while it builds a new facility in Manhattan. It spent
$50 million to purchase and transform the former Swingline stapler
factory on Queens Boulevard into MoMA QNS. It now houses the
museum's exhibits and about 125 staffers. Another 225 MoMA employees
work at The Factory, a nearby office building. MoMA QNS attracts
between 1,000 and 2,000 visitors daily.
The presence of MoMA encouraged other urban pioneer artists.
"we're finding that galleries are expressing interest. Certainly,
individual artists are starting to put on their own exhibits,"
says LICBDC's Ms. Baron. One such newcomer is the Sculpture
Center, a nonprofit that commissions and supports sculpture
exhibits.
The new arrivals are pleased with improvements in the area,
including the renovation of the Queens Plaza subway station
and beautification programs.
MetLife has built a cafeteria and fitness center in its building
to address one of the downsides of Long Island City - the relative
lack of amenities to which Manhattan workers are so accustomed.
For the near term, though, coaxing more companies like Competitrack
and MetLife to commit to Long Island City may be a challenge.
"On their own, it would take five to 10 years for a major tenant
to come in," says Michael Bailkin, chairman of the Arete Group,
which expects to line up a developer for its site soon. "In
order to get a tenant in now, you really have to have intensive
marketing of a good site by a credible developer."
Officials are hopeful that the New York Stock Exchange, which
is casting about for a site for a new trading floor, will see
the merits of Long Island City. With its plans to build a tower
adjacent to its existing site on hold, the NYSE has been meeting
with the New York City Economic Development Corp. and discussing
potential sites in Brooklyn and Queens. Whether Long Island
City is anywhere near the center of its target, though, remains
to be seen.
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