The intense amount of hype around Amazon’s second headquarters choice made it one of the few commercial real estate news stories to get a lot of mainstream media attention this year, other than the cyclically covered death knell for malls at the hands of e-commerce, or to put it plainly, Amazon.
However, the two cities the tech giant chose as home of HQ2, New York City and Washington, D.C., aren’t going to feel nearly the impact of Amazon’s new offices as would a mid-sized office market.
In the case of New York, the city has a total office inventory of 655 million square feet, according to Marcus & Millichap, with plenty of new product under construction, and Amazon is only expected to add eight million square feet to that total.
During Marcus & Millichap’s recent office and industrial Investment Forecast 2019 webinar by Jim Costello, senior vice president at Real Capital Analytics, which had a lot of talk about HQ2, Amazon likely needs the talent pool of New York more than the city needs the company.
However, Long Island City, the neighborhood in Queens that will house New York City’s HQ2, see some major changes. And there were quite a few underway to begin with.
The Long Island City market has been an outer-borough pick for commercial real estate developers for several years, due in part to it being just across the East River from Manhattan, and the fact that it had plenty of room for new spaces in place of defunct industrial sites to which Amazon will be the latest addition.
The life sciences industry has had particular interest as of late, according to a JLL report. Alexandria Real Estate Equities, the owner of the Pfizer headquarters in Midtown, reportedly spent $75 million on The Bindery, a 175,000-square-foot building that could become biotech labs and offices.
JLL reported that Long Island City has a total office inventory of 10.1 million square feet and that rental rates were at $45.97 per square foot at the end of the third quarter, with just under another 1.7 million square feet underway. Its high vacancy rate of 33.4 percent could more than likely change now that Amazon has chosen the locale.
One building will reportedly have Amazon as an anchor tenant is Long Island City’s landmark skyscraper, the one-million-square-foot One Court Square, with its Citigroup logo, which the bank is set to vacate in 2020. It’s safe to imagine that we will likely see the Amazon logo as a fixture on the skyline instead.
One development currently under construction is The JACX, being built by Tishman Speyer Properties. Its two 26-story towers will total 1.1 million square feet, and WeWork and Macy’s have already signed on as office tenants. Retail and restaurants are planned to connect the two buildings, and more of are bound to explode in the area, as Long Island City is known to be in need of more stores and eateries.
Meanwhile, on the multifamily front, Tishman is building Jackson Park, near JACX, which will total three towers containing over 1,800 apartment units. The development will also include a five-story clubhouse and a 1.6-acre private park, making this a potential home for new Amazon employees. Bisnow reported that median rents in Long Island City are $3,180, and residents can expect that number to rise when the company joins the neighborhood.