Tech

Long Island City real estate is going to be just fine without Amazon HQ2

Key Points
  • While politicians decry the loss of 25,000 jobs Amazon would have brought to New York, real estate agents say the area will be fine without it.
  • The brief period between November and February when Amazon was planning to set up its second headquarters in New York City was hardly long enough for the Long Island City neighborhood to see any lasting effects on pricing.
  • Real estate agents and local buyers say the neighborhood had been on the rise even before Amazon chose it as its HQ2 location, and prices will continue to climb without it.
A view of the waterfront of Long Island City in the Queens borough of New York, along the East River, on November 7, 2018.
Don Emmert | AFP | Getty Images

Ask a New York City real estate agent how they feel about Amazon's reversed plans to bring its second headquarters to the area and they will have some pointed words.

"This was the biggest unforced error in the city since they let the Dodgers leave Brooklyn," said Jason Haber, an agent at Warburg Realty Partnership. "That's how big this is. Like you need to go back over 50 years in history to find a corollary to this mistake."

But when it comes to the future of the real estate market in the Long Island City neighborhood of Queens where Amazon had chosen to set up shop, the situation seems far less dire.

"The reason[s] that Amazon wanted to come there, those fundamentals are still in place," Haber said.

That was the message from nine local real estate agents and three local buyers interviewed for this article. They all said Long Island City will be just fine without Amazon, even as politicians hurl blame at one another for the deal's fallout and decry the loss of 25,000 jobs the company promised to bring with it.

The relative calm in the real estate community is partly because agents say they remained cautious about the deal from the start, having read the fine print that said Amazon still had time to conduct due diligence before breaking ground.

"Once you read that, you have to advise your clients that this is certainly not a done deal," said Patrick W. Smith, a local real estate agent with The Corcoran Group who has been tracking Long Island City real estate for years.

But that caveat did not dissuade buyers from pouncing on properties that seemed like they could get scooped up any second. In the weeks when Amazon was still publicly planning its move, 147 contracts were reported to be signed, according to public reports compiled by Smith while he was an agent at Stribling & Associates. That compares to 54 during those same weeks the year prior.

Even Amazon employees reportedly got caught up in the housing craze, with two buying homes in a developing luxury building even before the public announcement was made, according to The Wall Street Journal.

After the deal fell through on Valentine's Day this year, when Amazon determined it no longer wanted to put up with community opposition, agents and buyers interviewed said interest is still hot in the area. According to Smith's data, the total dollars spent in the local condo market increased 8 percent between 2016 and 2017, and 12 percent between 2017 and 2018.

Now, the experts say, prices will continue to go up, but it just might take a bit longer to reach the heights to which Amazon would have accelerated.

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Gone in a flash

Amazon was in and out of New York so quickly that several agents said there was hardly time for the housing market to feel its effect.

"I don't think there was enough time for our marketplace to absorb any change," said Ranee Jaber of the commercial real estate company DY Realty Group, adding that building purchases generally take three to six months between signing a contract to closing. Amazon's New York plans lasted from November to mid-February.

Even the deals that did get signed during that brief period didn't necessarily bring in more cash.

"They didn't all go up," said Robert Whalen of Halstead, "some deals just got done."

Smith said he was still able to negotiate prices even when Amazon looked like it was entering the neighborhood, especially for larger apartments. For studios or one bedroom units, he said he would typically be able to bring down the price about 3 percent based on credits for closing costs, but since these units were in higher demand, developers tended to be less willing to compromise.

Gary Hirshfield, who bought the penthouse apartment of the Galerie development with Smith as his agent just prior to Amazon's initial announcement, said he bought at just the right time.

"My perception is that we got a discount off of asking price and we got some sweeteners in things like closing costs," Hirshfield said. "We feel that once Amazon announced … those discounts and benefits would have evaporated."

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'I'm a little bit more patient now'

Buyers searching for space in Long Island City felt pressure to lock in quickly once Amazon's move seemed imminent.

"People were less negotiable. They were firmer on their prices," said Carlos Rodriguez, who had been seeking an investment property in Long Island City with Compass agent Natsuko Ikegami prior to Amazon's announcement. He estimated listing prices shot up at least five percent, a price he "was very willing to pay" for the perceived value Amazon would bring to the neighborhood. He'd agreed to pay over $1 million for a two family house in a bordering neighborhood.

But when Amazon backed out, Rodriguez said he "felt that fundamentally changed the outlook for the area." Rodriguez asked the seller to shave $40,000 from the price, about the three percent often knocked off in the form of closing cost fees. He felt the price change was justified due to both the results of a house inspection and the Amazon news, but the sellers turned it down. Rodriguez is still looking to buy in the area, albeit with a different approach.

"I'm a little bit more patient now," he said, adding that he's willing to wait six to 12 months to move on the right property, instead of the one to two months he was targeting when Amazon announced its move. "There was a little bit of a sense of urgency before."

Jose Arriola, on the other hand, was looking for a property where his budding family could grow, having spent five years in Long Island City already.

"When we first moved in, there weren't many local businesses. There was maybe two coffee shops," Arriola said. Now, "it feels like there's a new building coming up every month."

Arriola began his apartment hunt with Compass agent Jessica Meis about a month before Amazon announced its plans to move to the area. Once Amazon selected Long Island City for its new office, he noticed a difference immediately.

"What we saw was a shift in going to an open house where it would be maybe my wife and I, maybe another family, to having to book an open house maybe a month in advance," Arriola said. "It definitely put pressure on us in trying to find a new place. It didn't make us want to look elsewhere because we like Long Island City and we wanted to stay there."

He said he didn't see an uptick in listing prices, but felt that Amazon's plans assured sellers they could stand their ground when it came to negotiations.

"They didn't want to give you any concessions," Arriola said. He went into contract in December on a two bedroom apartment with a pool, doorman and roof deck for a price in the ballpark of $1 million, just weeks after Amazon announced its move.

"I feel like without the Amazon news, maybe we would have waited a little bit longer," Arriola said, conceding he may have had more wiggle room in negotiations. But, he realizes, "if we waited a little longer and Amazon never pulled out, perhaps we never would have been able to find an apartment we liked."

Rodriguez is still mindful of risks he'll face as a property-owner, like the possibility of an economic downturn, that he thinks would have been mitigated if Amazon had stuck to its plans.

"I just want to close the deal," Arriola said. "I want to move into the new apartment and just keep living."

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Watch: Here's what a luxury NYC real estate agent thinks about Amazon HQ2

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