Globe St | March 24, 2017
By Rayna Katz
NEW YORK CITY—As a rezoning plan undergoes the approval process—and a new Second Avenue Subway station provides improved access to public transit—East…
NEW YORK CITY—As a rezoning plan undergoes the approval process—and a new Second Avenue Subway station provides improved access to public transit—East Harlem has become an appealing residential option for those priced out of other Manhattan neighborhoods, according to the newest research report from GFI Realty Services.
States the report , entitled East Harlem: A.K.A. the Neighborhood, “Developers and investors, recognizing the opportunity that East Harlem presents as an under served market, have been bullish with land, repositioning and multifamily acquisitions. Multifamily buildings rose to an average price-per-square-foot of $425 in 2016; an 8% year-over-year increase, while development sites are now trading at over $200 per-buildable-square-foot, a 25% increase from the price-per-buildable in 2015. As new construction in the neighborhood continues to heat up, they are expecting that figure rising as well.”
Aimed at reshaping a large portion of the neighborhood—an area that runs roughly from East 104th Street to East 132th Street between Park and 2nd Avenues, and from East 126th Street to 132nd Street between Madison and 5th Avenues—the rezoning plan analyzes the amount of residential space that would be introduced through the development of 69 different sites.
Further, it examines the number of new apartments that could be built if the city moves forward with building on a city-owned, vacant piece of land bounded by Park and Madison Avenues to the east and west, and by East 112th to East 111th Streets to the north and south.
The effort is expected to bring thousands of new apartments and almost 10,000 new residents, many of whom will benefit from the plan’s attachment to the Mandatory Inclusionary Housing Program, which requires builders to set aside 25% to 30% of apartments as below-market-rate housing. Additionally, it’s estimated that future developments will bring over 100,000 square feet of retail space and over 100,000 square feet of office space to the neighborhood.
“In New York City, both residents and real estate investors are on a constant quest to find the next hot neighborhood before anybody else, and recently, East Harlem has become that neighborhood,” declares Justin Fitzsimmons, research analyst of GFI Realty Services. “Residents are drawn to the ability to hold onto the neighborhood amenities they’d grown accustomed to elsewhere at a more affordable price, while investors are suddenly rushing to fill the need for quality housing options.”
The introduction of the new Second Avenue Subway station on East 96th Street is expected to further drive the neighborhood’s growth. Additionally, the yet-to-be-funded Phase II of the Second Avenue Subway will add three stations, extending the line all the way up to 125th Street.
“The Second Avenue Subway is fueling further confidence in the area, and is helping to silence doubts about East Harlem’s potential for prosperity,” Fitzsimmons says. “When Phase II is funded, we can expect investor interest in the area to skyrocket.”
The increased desirability of East Harlem is reflected by increases in the neighborhood’s median rents and median sales prices, GFI notes. At the end of 2016, the median rent in East Harlem was approximately $2,325—a 5% jump from 2015—and, as of last month, it reached $2,399.
At the end of the year, the neighborhood’s median residential sales price was $810,000 — up 12% from the previous year. Furthermore, there was $112 million in total sales in East Harlem in 2016—an unprecedented 99% year-over-year increase that was one of the city’s largest.
GFI expects the area’s attractiveness to continue to rise, as developers file plans, break ground, and open the doors for a host of market-rate, mixed-income and affordable housing developments.
“While it’s clear that East Harlem is in a transitional phase, the character of the neighborhood is strong, and we believe its deep-rooted culture will continue to shine through,” Fitzsimmons explains. “The area is far more famous for the taco trucks on Second Avenue than the new high-rises going up throughout the neighborhood, and frankly, we don’t see that changing any time soon.”