How Amazon Will Affect Long Island City Real Estate and Culture UPDATED
It was not the news New York City was expecting to hear from its soon-to-be newest resident.
In unceremonious fashion, the online retail giant Amazon scrapped its idea of joining the Big Apple after it had threatened to pull out last week amid calls for more transparency.
In a post on their blog, Amazon cited that state and local officials' unwillingness to work with them as the reason for their withdrawal.
It is a hard pill to swallow for the city's biggest proponents of Amazon's planned HQ2, namely Governor Andrew Cuomo, a very vocal supporter.
Even months after Amazon's announcement to name Long Island City as their second HQ2, the tech company continued to face heavy scrutiny and criticism.
Many state and city officials, as well as community activists and labor union leaders were skeptical of Amazon's willingness to help offset any negative local repercussions of this gargantuan move.
There were many skeptics who believed Amazon to be bluffing when threats were made to cancel the deal.
Many argued that Bezos and his executives knew what they were getting into when they signed up for their Long Island City deal and this was a tactic to gain leverage.
Amazon will be walking away from $3 billion dollars in tax incentives.
Besides tax incentives, New York City would have offered an immediate talent pool as well as municipal infrastructure that would have supported its operation and growth.
Notable government figures put in their two cents on Twitter:
"You have to be tough to make it in New York City. We gave Amazon the opportunity to be a good neighbor and do business in the greatest city in the world.
Instead of working with the community, Amazon threw away that opportunity."
Commented New York City Mayor Bill de Blasio
Vocal critics like New York congresswoman Alexandria Ocasio-Cortez hailed this as a victory, stating:
"Anything is possible: today was the day a group of dedicated, everyday New Yorkers & their neighbors defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world."
Many critics of the deal argued that plenty other companies like Google plan on building large campuses in the city without the help of major tax breaks.
It has been an eventful week for CEO Jeff Bezos, who has been embroiled in a clash with AMI, parent company of the National Enquirer over the leaking of intimate exchanges with the woman he is currently dating.
Many supporters of the Amazon deal feel that the pullout bodes badly for the city, hinting that other companies may find New York a hostile environment for businesses.
Certainly real estate professionals who had already starting ramping up their teams for a LIC feeding frenzy are feeling the wind out of their sails particularly hard.
The REBNY (Real Estate Board of New York) lamented loss of thousands of jobs stating:
"It’s unfortunate that we have lost out on an opportunity to create tens of thousands of jobs for city residents and generate billions of dollars in tax revenue to fund vital services including infrastructure improvements for transportation, schools, and open space. "
While many tech companies may still be planning on moving to or expanding in the Big Apple, the loss will be felt in LIC real estate market, which was experiencing some stagnation prior to the announced Amazon move to the neighborhood.
On the flipside, many Queens residents feel more confident at this time knowing that they may have avoided being priced out of their neighborhoods.
There is already plenty of buzz around the announcement along with plenty of speculation for the good and the bad.
Big business, developers, and investor always rejoice when new opportunities like this are opened up to them.
But many who represent the community and New York City residents see this a worrying event.
There has already been a fair amount of outcry over the huge tax break Amazon will be receiving from the city and state, when municipal budgets clearly need more and not less.
What will this actually mean for a place like New York City that already seems saturated with people and rising housing prices?
We looked at a few components that will break down the possible results of the major advent of Amazon's arrival.
Long Island City: A Brief History
The neighborhood of Long Island City started out, as its name indicates, as a city before 1898 when all the outer borough areas became incorporated into the City of New York.
It encompassed the whole western territory of queens, which included its closest neighbors such as today's Astoria and Sunnyside.
Much of Long Island City's history has been steeped in manufacturing, which saw a gradual decline during the 20th century.
It wasn't until 2001 when the city finally rezoned the neighborhood to jumpstart growth in both the residential and commercial sectors, did life begin stirring again in the area.
Big Businesses in the Area
Today, thanks to the rezoning of the LIC, many corporations and well-recognized businesses have found homes in the neighborhoods.
Silvercup Studios, a very prominent tenant in the area, has produced popular shows like 30 Rock and Sex in the City.
During the earlier rezoning years, Long Island City gained prominent tenants like Citicorp, Fresh Direct, and most recently Jetblue Airways.
Big Real Estate in the Area
With rezoning also came major real estate developments. The early 2000's saw luxury rentals and loft conversions coming to the area.
Following behind were restaurants, bars, coffee shops, and luxury condo buildings.
At one point, sales were going exceptionally well especially with those who felt that Long Island City would become the "gateway" to Manhattan.
This proved true, as real estate prices have risen significantly not only in the area, but also in neighboring areas like Astoria and Sunnyside.
Comparing average prices in both sales and rentals in Long Island City against any other Queens neighborhood will prove that the city's rezoning has had a long-lasting impact on real estate.
Real Estate Today in LIC
In most recent times, sales and rentals have been stagnant, especially with competing neighborhoods in Manhattan and Brooklyn.
PropertyNest compared sales and rental prices in the neighborhood from 2016-2017 and 2017-2018 prior to Amazon's announcement.
Prices did rise in sales for 1 and 2 bedroom condos in the 2017-2018 year compared to the year before.
However, the average price per square footage went down with 1 bedrooms by about $100, while increasing with 2 bedrooms by about $40.
The most notable revelations was that the number of listings with price drops doubled in the most recent year.
Still more concerning were the number of listings that were taken off the market permanently, although the number of sales stayed about the same.
Clearly, this shows that the swell in inventory did not in fact result in an increase of activity in the sales market in LIC.
Rentals reveal an even more about the current state of the real estate market in the area.
Inventory increased dramatically in Long Island City in the most recent year.
While this did indeed result in more rentals, the percentage of overall apartments that got rented dropped.
More importantly, average prices dropped especially in the most popular apartment sizes which are 1 and 2-bedroom apartments.
This most likely includes an increase in the number of concessions landlords gave to renters, which had increased across the city.
The Amazon Effect
The first week after Amazon made their announcement sparked a frenzy in Long Island City.
Real estate searches increased dramatically across every real estate platform, including inquiries with brokerages.
Number one on the list of inquirers were investors and sellers who are all looking for a way to profit off of the colossal arrival.
One bystander at a recent open house at a condo in LIC stated he'd never seen anything like it. Bidding wars were happening on the spot.
The 25,000 jobs that Amazon will be bringing to the area certainly will not just spark questions of housing but brand new businesses to cater to the new workforce.
While this spells good news for the stagnant rental market, it may just mean that empty units get rented by qualified tenants.
Development has gotten ahead of itself in in Long Island City, and the massive rental inventory has not moved as projected.
Prices may still remain stagnant until Amazon's plans actually come to fruition.
It could mean years.
A Closer Look at Possible Outcomes
If we want a realistic picture of what the long-term effects will be, it's best to turn our attention to the Seattle area, which experienced an influx of 40,000 jobs with the build of Amazon's HQ.
Nearly 10 years later, there's about another 50,000 jobs brought to Seattle on top of Amazon's opportunities.
Central Seattle has had a complete transformation, and is virtually unrecognizable from its former self.
The South Lake Union region was known for its parking lots, manufacturing warehouses, and overall lack of development.
The end result is skyrocketed housing prices, modern high-rises, and a plethora of businesses that have been injected into the area.
Amazon alone was responsible for 33 buildings going up in the South Lake Union area of Seattle.
While some of the results are positive, such as the fact that many people (namely Amazon employees) can walk to work.
Residential developments have risen rapidly to accommodate this workforce.
However, overall traffic in the city is far worse than they could have imagined.
Commute times have gone up exponentially to an average of 90 minutes due to overwhelming traffic.
Seattle now ranks third worst traffic congestion in the country.
Smart planning has to begin now as the traffic situation is already coming to a head throughout the five boroughs.
With an aging subway system that requires numerous major overhaul projects, ongoing road and bridge repairs, a steady stream of construction projects clogging up city streets, cuts in bus services, compounded with the influx of ridesharing-based car services inundating the roadways, the New York's traffic problems are already overwhelming.
The Takeaway: If New York City wants to make sure it learns from the mistakes of the Seattle experience, then city government and the state need to fund proactive and extensive expansion of public transportation services.
These measures should not only cover the Amazon headquarters area, but throughout the city.
It's also worth asking where the city and state will come up with this funding, as Amazon will be receiving significant tax breaks from both.
Rich or Poor
The Amazon Effect could also attract many other new businesses to the city and LIC itself.
Likewise Seattle has seen a large increase in the average income and employment rates have plummeted.
But still... many of Seattle's original residents find themselves completely displaced.
There are also questions of whether the job opportunities presented by Amazon will be filled by New Yorkers, or implants moving from other cities, as we've seen in Seattle.
This building boom is also responsible for wonderful new urban amenities like pedestrian plazas, farmers markets, and trendy restaurants in Seattle.
However, similar to the ripple effect of Silicon Valley on San Francisco, working middle-class city residents are being squeezed out of Seattle from rising real estate prices--not just the poor.
Although the average income of an Amazon employee is in the six figures, even they are having trouble finding affordable housing in Seattle.
This is clearly an issue when property development has boomed in a city, which can be counted by the number of construction cranes Seattle has at any given moment.
600 to be exact--that's the number of cranes in New York and San Francisco combined!
In New York, this development boom could go beyond LIC and spread not just through Astoria and Sunnyside, but farther down the train line, where Amazon employees may find a bang for their buck.
The Takeaway: Rising median wages in LIC may not protect various populations from being displaced.
The city needs to take measures to protect current residents in the neighborhood and surrounding areas by going beyond current plans of implementing affordable housing.
One of the community's biggest concerns is how the advent of the Amazon era affect schools in an area with already overcrowded classrooms.
Generally speaking, urban areas that had had huge tech giants come to town, have seen a drive up in education.
Where once there were struggling schools, there is normally a rise in standards and the level of education, as schools strive to propel students to become the future workforce.
Seattle school have also seen a rise in graduation rates. All promising signs.
However, some skeptics feels it's not necessary a direct effect of Amazon's headquartering in the Washingtonian city.
Furthermore, student homelessness is at an all-time high despite the improved numbers in education.
Deep concerns still linger for Long Island City itself despite Amazon's promise of helping fund a middle school in the neighborhood.
Some feel that it won't alleviate any current or future overcrowding, as this new school will be more than likely accommodating the education of a newer population.
The Takeaway: At the end of the day, it's the city's job to make sure schools are succeeding and achieving their academic goals.
Partnering with the tech giant may result in positive outcomes for the community's education.
Gentrification is a complex phenomenon that affects many urban areas around the country.
It can be a powerful and positive force in areas where resources, services, and revitalization area needed.
Gentrification can also add culture and art to an area.
Hyper or over-gentrification can do the opposite.
The flipside is that it can displace the neighborhood's inveterate population with rising cost of living, and destroy any of the neighborhood's original character.
However, we really haven't seen firsthand experiences with a single engine or driving force as big as Amazon's HQ2 arriving in an area like LIC before in New York.
Seattle, once known for being artsy city and a haven for creative minds and thriving music scene, is now driven by commercial business and the Amazon workforce with deeper pockets.
There is still very much an art scene, as Amazon employees do have the money to buy art, but sales for fan or commercial art tend to be much higher.
While many artist and musicians have managed to just hang on in the city, many of its lower wage communities have become homeless or pushed out entirely.
Gentrification is already responsible for pushing many artists more and more to the outer boroughs or completely out of New York City altogether.
Artists are still struggling to stay in Long Island City where commercialization has driven many of them out.
And while Seattle's economic engine is on high drive, its homelessness numbers have also soared.
In recent times, Amazon has contributed millions to the city to try and combat homelessness, but it's difficult to gauge if there are smart measures being taken.
While a large part of the workforce tends to be programmers at Amazon, the online titan has also been responsible for injecting quite a bit of diversity, which has been good news for Seattle.
These employees and new transplants to the city hail from other countries, many of whom have also brought over their families and started families in Seattle.
The company overall has a very diverse profile, but this may not have a dramatic effect on a city like New York whose claim to fame is its diversity.
The Takeaway: If Amazon wants to create a positive impact on the city, it needs to help retain spaces and opportunities for resident artists and musicians as well as working with the city to retaining and vastly expand affordable housing programs.
After all, it is creative minds, small-business owners, and the diversity of a community that gives each neighborhood and city its unique character.
Too many urban areas have seen a serious decline in their unique identity, especially when only large corporations and national retail chains are the only ones who can afford the rent.