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Writing Sample

Market Analysis of Queens West

Contact:Jianhao Michael ZengM.S. in Real Estate FinanceNYUSchack Institute of Real EstateClass of 2015Tel: 347-997-0664Email: michael.j.zeng@nyu.edu

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______________________________________________________________________

The entire report will refer to “report” as The Market Analysis report of Queens West;

Refer “Project” as Hunter’s Point development project and refer “Parcel 9” as address

4-75 48th Ave, Long island City, NY.

_____________________________________________________________________

Market Analysis of Queens West

Report Statement

The report is to examine the impacts of public use waterfront investment to real estate

market. The mixed-use project of Hunter’s Point, which sponsored by Port Authority

mainly for recreation and residential use, is one of the most important projects in New

York City recently. This report will focus on examining the impacts of waterfront

development, and how the public parks create value for real estate market, image of

NYC, and quality of life, etc. The report is going to use various source of data to

determine value could be captured by infrastructure investment, from various factors such

as real estate taxes, agglomeration, jobs creations and quality of life. The project will also

focus on the trend of Hunter’s Point, in the area of value growth of real estate,

demographic, future development, New York City employment demand, and

transportation, etc.

History of Long Island City

Because of its location advantage, historically Long island city was an industrial area

mainly served New York City for decades. In 1940, right after the completion of

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Triborough Bridge and Midtown Tunnel, long island city became a world-class industrial

center because of it is in the center of Metropolitan area.

Long island city is an industrial center of New York City since 1870. Today, still many

businesses rent storages and showrooms in long island city because of relatively cheap

rent and accessibility. Because of the location advantage, residential developments also

started rapidly since 1990. The rapid growth of land price in Manhattan encourage real

estate developers look for alternative space. Long island city gradually change from

industrial oriented to residential oriented. This report will focus on recent residential

development in Hunter’s Point, which located waterfront of long island city.

Queens West Project Summary

In 1983, an agreement established between City of New York, Port Authority and State

of New York, regarding a waterfront development. The project will focus on the

development of waterfront infrastructures and eleven development parcels, mainly build

around north-south thoroughfare (Center Boulevard.)

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70%

25%

3% 2%

Queens West Project

ResidentialCommercial/OfficeRetailPublic Facilities

Waterfront creation will include a recreation park bounded by 11th Street Basin to the

north, by the 50th Avenue to the south. Esplanade, walkway, benches, play areas and

playing fields are included in the recreation park. The neon lit Pepsi sign stays in the

recreation park permanently, sponsored by Pepsi Cola Inc. Aside from recreational

development, the project purposed to deliver 4.3 million square feet of residential space,

174,300 square feet of retail and 140,000 feet of public facilities. 10% of residential

development will be affordable housing component. There are four stages development

included in the General Project Plan.

1. Stage 1 includes three residential buildings - two of residential buildings are for

rental. It also includes a public School, P.S. 78 from pre-kindergarten through

grade 5. Senior citizens housing and library also developed in Stage 1. All stage 1

development already finished and it is ready to use as 2014.

2. On Stage 2, there are total seven residential development parcels. Two Parcels is

still under construction. A public school provides 660 school seats are also under

construction.

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3. Stage 3 and 4 developments are under construction and will provide commercial

and retail space.

Potential Pollution or environmental issue

Because of the previous use for industrial purpose, the first concern of development in

residential real estate is the potential environmental issue. Hunter’s Point was the freight

gateway to Long Island. All railroad freight cars to long island will transfer from boats to

rail in Hunter’s Point seaport. The tower that remain today in long island city call

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‘gantries’ and was used to transfer train cars. Since the main function of Hunter’s Point

was seaport, there were no serious environmental issues that hinder the residential

development in Hunter’s Point north and up to 59th Street Bridge.

One of objective of Queens West project is to eliminate the unregulated and unsanitary

conditions of Hunter’s Point. After the development agreement in 1983, the Port

Authority took environmental assessment of purposed development for the area.

---Potential Environmental Risk: For future development (Stage 3 and 4)

The area of Stage 3 and 4 are currently occupied by various commercial uses. Tennisport,

tennis club, Water Taxi landing, beach, public parking, and storage rooms are around this

area. From the currently use, the area of stage 3 and 4 would not have serious potential

environmental issues involve.

However, there is a potential superfund site around the Hunter’s Point south – Newtown

Creek. It is an estuary between Brooklyn and Queens. Newtown Creek is one of the most

polluted industrial sites in America. It contain years of discarded toxins, spilled oil and

sewage along with the industry development in Long island City for decades. The

Newtown Creak located right below the Stage 3 development and should be a potential

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thread for the project development. Indeed, careful, and comprehensive examinations

should proceed before the development process.

There are three positive aspects about Newtown creek.

1. First, the estuary of Newtown creek locates south of Hunter’s Point. The project

development located north of Newtown creek.

2. Second, Newtown Creek Wastewater Treatment Plant is the largest sewage

treatment facility in NYC and expected to complete in 2014. The government

expects the treatment plan can purify and remove most of the toxins from the

water.

3. Moreover, long island city has been moving from manufacturing, food

productions to warehouses and storages from the last decade. Pollution and

sewage creation have been decreasing as the change of industry function in the

boundary of Queens and Brooklyn.

Primary Market Analysis

The primary market of this project is the renter who is middle income with small

household. From the data of Census Bureau 2010 summarized by STDB, total population

is 6,903 within 0.3-mile radius of parcel 9. The median age is 33 and over 50% of renters

have household income $100,000 or above. Most people who live in these apartment

parcels are renters. According to the Census 2010, amount 3,764 households, 75% of

population is renters.

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Renter Occupied76%

Owner Oc-cupied25%

Occupid Households

Primary Market Projection

According the estimation from STDB, the population will grow annually 1.79% in total

population, within 0.3 radius. Compare with New York State and National growth rate,

which is 0.38% and 0.71%, the strong population growth of population in this area will

experience a strong demand for residential apartments. Agglomeration and density also

create convenience to the community. The household amount estimated to growth at

1.9% annually.

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Secondary Market

The secondary market of this project is low-income family. Affordable housing is a key

economic generator for New York City. Affordable housing policy will give incentive for

grass-root to live and work nearby, and better serve for the community. New York City’s

shortage of affordable housing has reached a crisis point. Therefore, the absorption rate

of affordable housing units will be high. Because government will subsidize the rent,

affordable housing usually will reach to full occupancy. Building affordable housing not

only can decrease the property tax for the project, but also bring can stimulate the local

economy.

Location and Accessibility Analysis

The project located in east side of East River, right across United Nation on 42th Street

midtown Manhattan. The straight distance from parcel 9 to Times Square is about 1.6

mile. QueensBorough Bridge and Mid-town tunnel connect between Long Island City

and Manhattan. People can easily travel between Brooklyn, Long island, Manhattan and

Upstate New York by various interstate highways. Two major airports are within the

travel time of 25 minutes. The closest subway station – Vernon Blvd & Jackson Avenue,

is on the No.7 train route, and is one station away to Grand Central Station.

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Driving & Carpooled

22%

Walk and work nearby12%

Other Public Transportation

2%

Subway64%

Transportation To Work

Public Transportation – Example of Parcel 9

Public Transportation plays an important role in Real Estate development. Different

demographics have different demand on transportation. From the demographic

information, most of the renters are middle class with very small household size. Most of

them are commuting between Hunter’s Point and Manhattan everyday. Therefor, using

public transportation to work is the first choice for them. There are many kinds of public

transportation available around the residential parcels. Subways, railroad, and ferryboat

are within walking distance. Walking distance to No.7 train subway station is around 6

minutes. According to the ACS population summary, over 66% of workers who live in

Hunter’s Point are using public transportation, and subway is the highest usage when they

select transportation to work.

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Prediction about Queens West Project

Prediction 1--From the perspective of the entire New York City

New York City is the biggest financial center of United States for many decades.

According the U.S. Bureau of Labor Statistics, the top five leading industries in

Metropolitan area is Professional service, Education, Information, Finance/Insurance, and

Real Estate related service. From the Location Quotients, we can observe that the

percentage of employees who work for these industries are significantly higher than state

and U.S. average. These industries require well-educated workforce and younger

generation. Most of employees who work in these industries have Bachelor degree or

higher, and they are relatively younger than the other industries’ employees.

Professional Service

Education Service

InformationFinance and Insurance

Real Estate1.3

1.52

1.511.48

1.49

2.17

2.07

32.82

2.26

Location QuotientUnited States New York Metro NYC

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Projections also support the trend of employment for the top 5 industries of New York

City. According to the New York State Department of Labor, the growth rate of all 5

industries in New York City are all higher than the growth rate of New York State’s.

Therefore, the overall employment for the primary market is strong and will continue to

have stable growth. The middle-class rental apartments should be popular for now and in

the future. As the rent of New York City goes up, the rent for alternative living place

such as Hunter’s Point, Williamsburg and New Port, NJ will also go up as a result.

Professional Service Education Service Information Finance Related-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Projected Job Growth Through 2020

Tot

al %

Ch

ange

Prediction 2—Accessibility to job: A comparison with Williamsburg

From accessibility to job perspective, as the report identify before, there are strong

growth in New York City for the top five industries. According to the map from Regional

Plan Association, the accessibility to work by transit for the people who work in the

leading industries is very high. Most people who work for finance, education, and

professional services are spend 25 minutes or less to their work place, from Hunter’s

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Point.

Williamsburg has a similar location compare with Hunter’s Point. L train goes through

between 14th Street and Canarsie. However, most of the office for professional and

financial services located in Midtown Manhattan. Ernst & Young, Morgan Stanly, and JP

Morgan located around Grand Central Station. Therefore, by only looking at public

transportation perspective, Hunter’s Point is more accessible than Williamsburg.

Prediction 3—Walkability and School District

Walkability also is a crucial factor when people making site selection. The project is to

attract more middle-income, small family households to join into the community. Of

those small family households, many of them will plan to have children very soon. Such

factors as libraries, public schools, and play areas are important when they select

apartments. Moreover, walkability to school is preferable because of safety and time

saving.

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Primary market users, who are middle-income households, concern about the school

district when they select their living environment. From the data of NYC Department of

Education, the overall progress is acceptable. Since Long island city was an industrial

area, the school was relative lower quality. For the future, as more young professions

moving into this area, the next generation in P.S. 78Q will perform better because of the

education level of parents. The Public Facilities plan currently includes two schools and

one library. A community center is also on the plan but subject to approval. The total area

of public facilities is 2% of the Queens West project, which is reasonable because the

plan also include parks and waterfront area.

Local Knowledge, Finding, and Projection

From ACS Housing summary, the average contract rent between 2005 and 2009 is

$2,028. Recently, most one-bedroom apartment rent is around $3,018, and two bedroom

apartments are around $3,959. Rent per square foot for one-bedroom apartments in

Hunter’s Point are even higher than New York City’s one-bedroom, because of the

relatively new buildings and designs. From the report of REIS, there are seven similar

apartment buildings available for lease in 0.4 mile radius. Most of them are complete

after 2010 with new design. 73% of available apartments are studio and one bedroom

apartment. The vacancy rate of these buildings are 1.88%, which is below the average of

Queens and New York City, which have annual rate of 4.1% and 2.5%, respectively.

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Studio 1 BR 2 BR 3 BR$.00 sf

$1.00 sf

$2.00 sf

$3.00 sf

$4.00 sf

$5.00 sf

Apartment Rent per Square foot

Hunter Points Queens New York

Studio 1 BR 2 BR 3 BR0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Average Rent Per Unit

Hunter PointsQueensNew York

Axis Title

Parking

According to the General Project Plan, the entire project will have 5,915 parking

spaces, including for the commercial use. Off-street parking spaces in structures

at ratios of about 0.6 spaces per dwelling unit for residential spaces are proposed.

Valet parking and on-street parking is also available.

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Because parking space is a good way to anchor people to live the community. In

2000, General Project Plan amendment resulted to decrease 20,000 square feet

residential area to 135 parking spaces.

From the previous analysis, most of resident go to work by public transportation.

According to the ACS housing summary, only 27.3% renters will have one

vehicle for use. The average number of vehicles available is 0.7, which means

each household will only have 0.7 vehicle available. By matching with the 0.6

parking spaces per unit plus the on street parking, parking space should meet the

demand of residential use for now.

However, as the demographic change for the renters, they may want to have

vehicle after they have children. Expect to have parking space shortage as the

change in size of household.

Prediction – The Mixed-use development will create demand by itself.

---For Residential Use

Aside from income factors, the development of Stage 3 and 4 will create huge demand of

apartments in Hunter’s Point internally. According the General Project Plan for Queens

West project as of January 2008. In stage 3 and 4, there are 2,350,000 foot of

commercial/office/hotel area will be created. 72,675 square retail space also projected in

the development.

The demand of small apartments will increase after the completion of stage 3 and 4. As

the strong supply of commercial space in Hunter’s Point in the future, the population who

employed in Hunter’s Point will create demand for apartments. Small apartment will be

popular as a result of more young professions work around this area.

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---Commercial Use

Demand for commercial use of space will also increase as a result of strong employment

growth in New York City. Because of the limited office space in Manhattan, businesses

start looking for spaces out side of Manhattan. Long island city should be a very good

alternative office space for business. Agglomeration will attract business to set up their

offices into Long island City because the accessibility of labor poor. Secondly, there are

still many remaining industrial area around Long island city, business can set up

showrooms and warehouses in long island city.

---Retail Space and Public Facilities

There are only 3% retail spaces in the development plan, which considerable not enough

for supporting the big residential development project. Even though there are many

existing retail areas within the waking distance, 3% of retail space is bad plan for such a

big development project. The demand of retail spaces will significantly increase over

time. Laundries, supermarkets, dry-cleans, and pharmacies is necessary in a big

community. Shortage of retail space will occur as more and more people move into

Hunter’s Point.

Supply

--New Construction

Within 0.3 mile radius, there are 3 sites are under construction, 3 sites are already

completed and going to rent out, and 1 sites is purposed. Of these 7 sites, 4 of them are

low-income housing. Total supply for residential apartments is 3,769. 56% of these new

apartments are for low-income housing.

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Low Income56%

Apartment44%

Type of apartment in new supply

From REIS, tracking construction activities in Queens, there are 230 units of new

apartments will be delivered into the market. The net total absorption will be 258 units.

Therefore, the vacancy rate expected to go down to 3.0%. 2015-2016 is projected to

average 0.6% annually for new formation of household, which will absorption most of

the units. Vacancy is expected to go down from 2.4% to 1.8% by year-end 2016. Asking

rent and effective rent will increase as a result of huge demand for new apartment.

Some adjustment must be made by this report because the project target to different

income people.

1. The net absorption should be higher than average because big portion of new

completion are for low-income households.

2. The vacancy rate will be lower than the average in Queens because of the huge

supply of commercial office space after the completion of Stage 3 and 4 of the

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project. People who work in office will choose nearby residential complex to live.

However, relatively high rent level also hinders renders.

3. Near by retail store are not enough to support the residential market. For example,

only 4 supermarkes around this area. This is not enough to support a large

community.

Monitoring Strategy

1. There are several websites that update the recent activities in Hunter’s Point. The

websites contain opinions from both residents and real estate developer. The

websites also contain rental and sale information in Hunter’s Point apartments.

New development information, pollution level and transportation information also

available in lictalk.com.

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Image of New York City

One of the purposes of development in Long Island City is to remove negative image of

Queens. Long Island City was an industrial area. High vacancy of residential and

pollution are some of negative impact to New York City. Recently, many art galleries and

museum move into long island city. MoMA PS1 is one of division from Museum of

Modern Art. Over 20 art galleries are located around Hunter’s Point and it will eventually

change the negative image of Long Island City. Moreover, recreation and waterfront area

bring quality of life for not only resident in Hunter’s Point, but also for New Yorkers.

Conclusion

In Conclusion, the Queens West Project is a successful mixed-used project in New York

City. The residential development is exactly meeting the demand of New York,

especially for people who work for the leading industries in Manhattan. Meanwhile, the

waterfront development in the Queens West Project also pushes up the demand for

apartments because renters are looking for a better living environment. Even though the

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relatively high rent and shortage of retail space, renters will choice to reside in Hunter’s

Point.

End

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Works Cited:

Bureau of Labor Statistics. Accessed May, 2014. http://www.bls.gov/home.htm

New York City Economic Development Corporation. http://www.nycedc.com

New York State Department of Labor. http://www.labor.ny.gov/home/

Queens West Modified General Project Plan. http://www.queenswest.org

REIS. Accessed April 29, 2014. https://www.reis.com

Site To Do Business. Accessed April 29, 2014. http://stdbinc.com