This blog, written by Sean Deery, originally appeared here: https://bit.ly/32SPD8Z
Fall 2020 Symposium – Review of Part 1
On September 18th, the Real Estate Institute brought together industry leaders from commercial real estate, affordable housing, regional planning, and Long Island’s business organization to discuss the state of Long Island’s economy and our path forward towards an economic recovery.
The running theme throughout the information filled discussion (recording available soon) was that the key projects that made Long Island have so much potential/progress in 2019 will also be the reason Long Island will make one of the fastest economic recoveries of the entire region.
The road will be bumpy, but as this blog will explain, these key projects must be moved forward to correct the deep liabilities afflicting our region from the past decade, and to reflect the current situation that Long Island finds itself in due to COVID-19.
Topics that will be covered below:
● Economic Hubs
Brookhaven National Laboratory
Long Island Innovation Park at Hauppauge
Transit Oriented Development
Long Island Rail Road
JFK and LaGuardia
Last Mile Transport
(Look for subtopic summaries in italics at the start of each subtopic)
Unemployment rates on Long Island sat at 3.2% in 2019. Our businesses are hungry to get back there.
Almost 98% of Long Island businesses are open at some level of capacity.
Regulation reductions can help to keep those businesses open this winter.
95% of commercial leases are still being paid – communicate rather than dislocate/nonpayment.
Square feet per employee used to be ~235sf, more recently fell to ~185sf, but will likely rise back to +200sf.
Economic recovery timeframe will largely depend on if there are COVID spikes from schools.
Childcare, distributed energy resources, grid reliability, and offshore wind are important topics.
The following economic engines of Long Island were discussed during the symposium.
The $1.3B arena will hold 19,000 people and include a 350,000-square-foot retail center, restaurants and a hotel on 43 acres of the state-owned racetrack property. A groundbreaking was held in September 2019 and a 30-year naming rights deal was recently signed with UBS wealth management service – UBS Arena. There also are plans for a $100 million investment in transit, infrastructure enhancements, and a newly constructed Long Island Rail Road station.
Construction of the arena, hotel and retail village will create 10,000 jobs and generate $2.7 billion in economic activity. By 2024, the development will sustain 3,200 new full-time jobs, produce $858 million in annual economic activity and generate millions of dollars in tax revenue.
New York Arena Partners, the developers building the project, is comprised of the Oak View Group, Sterling Equities, whose principals include the Wilpon family, and Scott Malkin Group.
Brookhaven National Laboratory
The US Department of Energy recently celebrated the start of the $4 billion Electron-Ion Collider – a 2.4-mile-circumference particle collider to explore the innermost three-dimensional structures of protons and larger atomic nuclei. With a proposed budget of $2.6 billion, the project will draw on expertise from Brookhaven National Lab and at universities/laboratories around the world.
Research Centers for the US Department of Energy. C2QA will aid the creation of quantum computers with more robust qubits, optimized algorithms that target specific scientific applications, and develop error-correction solutions.
Brookhaven National Laboratory encourages entrepreneurship and actively promotes the formation of start-up companies around technologies developed there. Ivar Strand recently joined Brookhaven Lab’s Strategic Partnerships Programs Office to increase funding and partnerships.
TRITEC Real Estate Co. is currently developing Station Square – a project that will eventually bring 1,450 residential units, 195,000sf of retail space, 360,000sf of office/commercial space and 60,000sf of flex space to the 53-acre site surrounding the Ronkonkoma LIRR Station.
Ronkonkoma is uniquely positioned .5 miles from the Long Island Expressway, 4 miles north of Sunrise Highway, 3 miles west of Nicolls Road, and sits adjacent to Long Island MacArthur Airport – Long Island’s largest regional airport. The Ronkonkoma LIRR Station is Suffolk County’s busiest rail station with over 17,000 weekday commuters and the MTA is set to expand the Ronkonkoma Yard to 23 tracks because of the prominent role this station plays in the LIRR system. Long Island MacArthur Airport is continuing to advance its prominence as a regional airport with over $21 million of new infrastructure upgrades in the last year, airlines expanding their service there, over 2 million passengers per year, and Governor Cuomo’s $100 billion plan to upgrade New York’s airports.
With so many assets in one region, Jones Lang LaSalle Inc. is even proposing a $1 billion mixed-use plan to transform ~86 acres of municipal property between the Ronkonkoma LIRR station and Long Island MacArthur Airport. The proposal includes a convention center, a 300-key hotel, a 200,000 square foot medical research and STEM education complex, a 7,500 seat indoor arena, and a 6,000 seat outdoor soccer/lacrosse stadium with four to six outdoor community practice fields.
Long Island Innovation Park at Hauppauge
The Innovation Park is Long Island’s most significant employment hub (the 2nd largest industrial park in the United States) with 1,350 companies, 55,000 employees, $13 billion in economic output, 58% tradable sectors, and a supportive business environment looking to collaborate and expand opportunities. The Town of Smithtown completed $600,000 worth of reconstruction on several main entryways into the Innovation Park.
Smithtown approved a zoning change that will allow apartments and mixed-use buildings to be developed on 13 parcels of seven acres or larger – increasing the value of those parcels by 40 percent! The zoning code change will allow developers to build as many as 1,000 apartments, mixed-use buildings incorporating ground-floor retail or restaurants, and apartments/offices above. There are also 60 vacant parcels and 314 parcels are used for warehouses or storage.
A 40,000sf mixed-use building by the Kulka Group and Aresco Management is rising like a beacon of hope for what is to come at the Long Island Innovation Park at Hauppauge – ground-floor retail and three floors of office above, & many advanced features. TRITEC & Rechler Equity are also active there.
The Long Island home prices hit record highs – Nassau County median home price of $595,000 in August, up 7.6% YoY – Suffolk County median home price of $465,000 in August, up 10.1% YoY.
The high demand is mainly bolstered by an exodus from NYC, low interest rates, and lack of availability.
Many townships adopted virtual public hearings – improving access and a potential long term offering.
Long Island Housing Partnership held 3 virtual lotteries and TRITEC got their Bay Shore project approved.
The following housing topics were discussed during the symposium.
Thousands of New York City residents fled to their second homes on Long Island, found a LI home/apartment to buy, or left their NYC apartment/rental to rent on LI. The United States Postal Service logged close to 25,000 permanent or temporary change-of-address requests from NYC individuals, families, or businesses to Long Island. Last month, the number of contract signings soared by 45.6% in Nassau and 42.4% in Suffolk, compared with the previous August
An important note is that these transplants came to Long Island because the housing here is comparatively affordable to NYC. However, if supply is not expanded dramatically over the next year, the housing costs of Long Island may start to push new/potential residents away. Ideally, the urban/walkable lifestyle that many of these former city residents are used to can help sway public opinion in favor of ToDs and rezoning.
Transit Oriented Development
New Jersey has pushed for transit oriented development over the past 15 years with great success that has added diverse housing options to their market that makes housing affordable across all price levels. This is exactly the progress that Long Island needs to make.
Nassau County’s Office of Community Development will allocate a total of $1 million from the federal Community Development Block Grant program to allow municipalities to support transit-oriented development – by completing property acquisition, streetscape improvements, traffic calming, façade improvements, renovation work and more – with intentions to help fund at least three projects. Due 10/18.
Westbury – The Village of Westbury recently released its downtown revitalization plan, which includes the transformation of 50 acres of the industrial neighborhood north of the LIRR Westbury Station – which serves nearly 4,000 riders daily. In addition, the Village amended its zoning resolution in 2019 to provide for a new TOD district that encourages residential development in the area around the Westbury LIRR station. The MTA is offering a 99-year ground lease on 1.6 acres of property and has the potential to raise millions of dollars for the MTA over the course of a lease
Hicksville – the Town of Oyster Bay was recently awarded a $150,000 in competitive Transit-Oriented Development grant funds from the Nassau County Office of Community Development to assist in redevelopment of downtown Hicksville – which was also awarded nearly $10 million in New York State Downtown Revitalization Initiative (DRI) grant along with the Metropolitan Transportation Authority’s $132 million investment in the new Hicksville railroad station. 23 potential projects totaling more than $230 million in public and private funds, are vying for a piece of the $10 million state grant.
Apartment projects are progressing because of extended building permits and digital approval processes, but the progress on many important projects has been delayed because of worker reduction requirements, townships who held out on the digital approval process, and increased lumber costs.
Market rate apartments are in high demand because of all the workers from NYC who want an amenitized building in close proximity to community assets. The building owners hope to keep these new tenants as long as possible, especially with local coworking studios.
Local codes mandate 10% affordable housing in new apartment developments, but many developers have added up to 20% affordable housing units. The Long Island Housing Partnership has developed/is developing 49 projects this year – with 10 new projects due to the increased demand for housing on Long Island – bringing their development total up to 1,000 apartments this year that are all affordable.
Outdated centers like the Broadway Mall and the Sears Site in Hicksville have proposals for new development that could be hastened with a streamlined approval process. These projects aim to provide lifestyle districts that keep residents from having to travel for their daily needs, create a vibrant community, and provide close access to transportation options.
The LIRR has a $16B budget with a $12B problem. Capital projects continue. Operations, not so much.
Without federal funding, workers will start to drive, the roads will clog, and the recovery will reverse.
10% of LI’s workforce uses LIRR into the city, and they bring back 20% of LI’s income.
Micromobility has seen huge adoption. Industrial buildings are more in demand than ever.
The following transit topics were discussed during the symposium.
Long Island Rail Road
In recent years the MTA has invested more than $13.7 billion in new service and infrastructure to better serve Long Island commuters. Among these investments are the LIRR Expansion Project and East Side Access project.
East Side Access will provide approximately 162,000 LIRR commuters with a faster and easier commute from Long Island to the east side of Manhattan in a new eight-track terminal and concourse below Grand Central Terminal. The revised budget for the East Side Access project is $10.333 billion with a current estimate at completion of $11.1 billion. Revenue service is forecasted for December 2022.
The LIRR Expansion Project from Floral Park to Hicksville will improve mass transit, reduce traffic congestion, protect the environment, and enhance quality-of-life for communities along the Main Line. Major project elements include the elimination of seven grade crossings, new parking facilities, upgrades to railroad infrastructure and passenger rail stations, and other local improvements. The double/triple track efforts will reduce commuting times for over 300,000 daily riders.
JFK and LaGuardia
In October 2018, Governor Cuomo advanced a $13 billion vision to transform JFK into a unified, interconnected, world-class airport; improving road access to the airport; and expanding rail mass transit to meet projected passenger growth. The first new gates will go live in 2023 with projected completion in 2025. Electrification of the terminal is advancing, the TWA Hotel is open, and the second phase of the Air Cargo Modernization Program has begun.
LaGuardia Airport’s $8 billion overhaul continues to make steady progress as it will become the first completely new airport in the United States since Denver International 26 years ago. The $2 billion AirTrain proposal is still facing community opposition, but the public-private-partnership using design build strategies is a huge success on the airport renovation.
Last Mile Transit
A partnership with Pedal Share is allowing the planned roll-out of bike share programs in the Village of Southampton, Hampton Bays, the Village of Babylon, and the Village of Patchogue to commence once again. Bus rapid transit on Nicols Road and Route 110 are also advancing.
Be sure to register for the second panel discussion at 9:30am on Friday, 09/25 over Zoom to gain insights specific to COVID-19’s implications on the real estate industry at large.