Savills Veteran Steve Walbridge Joins SquareFoot
I’m happy to share that Steve Walbridge, a longtime colleague of mine, has become a full-time member of the SquareFoot team. Steve’s joining is a testament to both the power... Read More
With Amazon pulling out of New York’s Long Island City as one of the locations for its highly-anticipated HQ2, many are lamenting the loss of more than 27 billion dollars in tax revenue and upwards of 25,000 jobs. While the merits of the deal have been hotly debated, it’s hard to contest that Amazon’s presence would have spurred considerable growth in LIC.
One area that hasn’t been discussed is how an anchor tenant like Amazon generates interest from small and medium businesses in a submarket, and whether an anchor tenant is necessary to prop up a new business district.
To better identify and understand any changes in the market, we analyzed the behavior of our hundreds of thousands of NYC based website visitors, down to the specific locations our brokers went to visit with our tenants.
Using SquareFoot’s data as a proxy for small- and medium-size businesses’ interest in Long Island City, it’s clear that Amazon’s presence helped validate the submarket as an appealing alternative to Manhattan or Brooklyn. While some of that optimism has lingered since Amazon’s departure, it remains to be seen if this growth can sustain without a major business in the neighborhood.
Here are our findings:
First, some context to our data: The above chart measures Long Island City inquiries we’ve received each month. A New York City inquiry can include a dozen preferred neighborhoods, or just one. For context, more than 25% of our clients inquire on 1 neighborhood only, while nearly 20% inquire on 5 or more.
As shown in the data above, interest in Long Island City skyrocketed in November, coinciding with Amazon’s official announcement on 11/13. By January, the initial buzz had started to level out, but interest in Long Island City was still 4x what we had seen from March through September.
What we didn’t account for was Amazon’s sudden withdrawal. In our weekly view, you can see a massive spike in Long Island City inquiries when Amazon pulled out of their NYC arrangement. Since the announcement, we have yet to see any material decline in demand.
While a small percentage of our recent inquiries have been opportunistic business owners looking to capitalize on lower rents in the wake of the news, many of these businesses are, for the first time, genuinely interested in Long Island City. These companies are drawn to the convenient public transit options and average asking rents that are more than $30 per square foot cheaper than what you’ll find in Midtown Manhattan. Before Amazon, it didn’t seem worthwhile to consider options outside of Manhattan.
Our inquiry data and broker feedback generally confirm our initial hypothesis — Amazon’s presence, however brief, helped validate the market and accelerated growing business’ interest in what was already an up-and-coming business district.
We believe Long Island City will continue to grow without Amazon HQ2, but it remains to be seen if the neighborhood needs an anchor tenant to become a realistic and appealing option for small and medium businesses.