Listing Pushes Limits as Office Demand Surges Beyond Manhattanby
Pair of Long Island City buildings seeking $375 a square foot
Vornado, RXR are among landlords who've made deals in the area
On the eastern fringe of New York’s Long Island City, far from the apartment towers that are remaking the skyline, one real estate owner wants to know how much investors might pay for office space.
In the past 18 months, Manhattan landlords Vornado Realty Trust and RXR Realty LLC bought office properties in the same area of the Queens neighborhood for $325 and $346 a square foot, respectively. Now, a smaller listing nearby will seek to top those deals. The package of two adjoining buildings is going on the market Wednesday for $29 million, or $375 a square foot.
“We see the market is very strong, demand is there and we decided to go higher,” said David A. Chkheidze, the Cushman & Wakefield Inc. broker who is listing the parcels at 45-01 Northern Boulevard and 34-08 46th St. with Conrad Martin. “We think the potential of approaching that number is real.”
The two-story buildings, which have had the same owner since 1977, are being offered as investors known for their Manhattan office holdings push into the outer boroughs as a growing residential population seeks cheaper work space closer to home. Vornado, owner of more than 20 million square feet (1.9 million square meters) of Manhattan offices, paid $142 million in March for Long Island City’s Center Building, an eight-story property at 33-00 Northern Blvd. The price was almost 70 percent more than what the previous owner paid in 2012.
That deal came about six months after RXR, owner of the Starrett-Lehigh Building in far-west Chelsea, paid $110 million for a seven-story property at 37-18 Northern Blvd. Tenants include Muppet creator Jim Henson Co. and a firm that operates an organic herb and vegetable farm on the rooftop.
“We’re very bullish on the building,” said Seth Pinsky, an executive vice president at RXR who oversees the firm’s strategy of identifying New York neighborhoods that have strong growth potential. “A lot of the creative and innovative workforce is living in the area.”
The building is close to other districts with swelling populations of both residents and office tenants, such as Astoria in Queens and Brooklyn’s Greenpoint and Williamsburg sections, according to Pinsky.
“What’s happening now is you’re getting a critical mass that’s looking for the type of office space that traditionally has been found in Manhattan and is increasingly being demanded outside of Manhattan -- large floor plates, high ceilings, great light and air and beautiful views,” he said.
RXR can still rent Long Island City offices at a substantial discount to prime Manhattan rates, “and we think that’s a really great position to be in, where you can be a low-cost provider of space but seeing the revenue of the building increasing over time,” Pinsky said.
Asking office rents in Long Island City climbed 13 percent in the third quarter from a year earlier to $32.90 a square foot on average, according to brokerage Newmark Grubb Knight Frank. That compares with midtown Manhattan’s average of $83.24 a square foot.
Companies that leased Long Island City offices in the third quarter included Macy’s Inc.’s photography studio, agreeing to 150,000 square feet, and the office-sharing firm WeWork Cos., which established its first Queens outpost with a 51,565-square-foot deal, Newmark said in its quarterly report on the area.
The adjoined buildings being listed by Cushman include about 23,000 square feet of offices and about the same amount of retail space on the ground floor, Chkheidze said. A Sleepy’s mattress store, whose lease expires in 2020, takes up 7,000 square feet. The owner is listed in public records as Spiel Associates Inc., a bookbinding firm that’s based at the property.
“There is big demand for office here,” Chkheidze said. “It went from Manhattan to Brooklyn and from Brooklyn to Long Island City. This is the trend of the office market.”