Go East, Young Man: The East Side Readies for the Second Avenue Subway

Posted on December 20th, 2009 by Daniel Fastenberg in Business, Subway

By Dan Fastenberg

2nd av subway

New York City got its first mass transportation line in 1837. It will get its newest one in 2018.

The arrival of the New York and Harlem railroad, as the first line was called, proved to be the catalyst for the development of Upper Manhattan. And today, the Upper East Side, known for its Museum Mile and the Gold Coast of stately mansions along Fifth and Park Avenues, is one of the city’s most affluent neighborhoods.

Will the installation of the long anticipated Second Avenue Subway line have the same kind of dramatic effect as the first tracks did? For its part, the Metropolitan Transit Authority estimates that by 2020 about 30,000 new residential units will be built as a direct result of the new line. And while real estate experts do expect to see an increase in property values on the far East side, in the range of 10 to 20 percent, they don’t foresee a transformation on the same scale as the one that converted green pastures into Gracie Mansion.

“The major thoroughfares on the East Side will still be Fifth Avenue and Madison,” said Jeffrey C. Peisner, a broker at The Ripco Realty firm. “East of Second Avenue is still only full of drug stores and banks. The greatest impact one could expect from the new subway is an across the board increase in the price [of real estate] between 10 to 20 percent. You aren’t going to see them open up an Abercrombie & Fitch because of a new subway line.”

The Second Avenue subway Project was initially proposed in the 1920’s to alleviate commuter congestion along the East Side, which contains nine avenues at its widest.

Over the last 90 years, three major groundbreakings have taken place, but outside factors like the city’s financial crisis in the 1970’s grounded construction. This latest push, the brainchild of Mayor Mike Bloomberg, has seen its own share of hiccups, from displacement of some 32 residents to the forced shuttering of at least 14 business, according to Community Board 8, which covers the portion of Manhattan’s East Side where construction is currently taking place. For residents along the construction route, it’s been a more than 24-month onslaught of noise, congestion and inconvenience.

In addition, the expected opening date for the new subway line has already been pushed back twice. With the current price tag set at $5.728 billion, the first phase of the so-called T Line is expected to open in 2018. It will run from 96th to 68th Street along Second Avenue. Eventually, once all four phases of the construction are completed, the so-called T line will run from 125th and Second Avenue to Hanover Square in Lower Manhattan. Once complete, residents of East End and York Avenues will see their commute to a subway station cut in half.

Despite making life easier for the East Side’s straphangers, the completed line isn’t expected to shake up the city’s real estate market. In more than 20 interviews, brokers, community leaders and other leading observers of the New York real estate world say that the new subway line is not going to cause a dramatic overhaul of the area, mostly because the neighborhood is already largely developed. Other obstacles, experts say, might prevent a brand new day for the area. Those include a lack of vacant lots and a high concentration of small apartment units.

And with so many other factors in play, such as an unstable housing market, no official projections exist on the impact the new subway line will have on the private real estate market. Moreover, leading observers point out that even though it takes the residents of the far eastern fringe of the Upper East Side longer to trek to the Lexington Ave. subway, it is still a popular neighborhood.

“The East Side has always been attractive,” said Michael Slattery, the vice president of the Real Estate Board of New York (REBNY).  ”It’s already a high price area. The subway will definitely make life more convenient for residents. But for development and an entirely new market. No. This area is too established as it is.”

One neighborhood that could experience a major transformation as a result of the subway is East Harlem, Slattery said. Once construction on the Second Avenue subway is fully completed it will end at 125th Street and 2nd Avenue, a location in the heart of East Harlem, which, according to the 2000 Census, has the highest concentration of public housing in New York City.

The area is already experiencing a bit of a resurgence, thanks to its first rezoning last year since 1961. According to the quarterly statistics provided by the REBNY, East Harlem, along with Battery Park City, was the only city neighborhood that saw its average price per square foot grow during the economic crisis from the second quarter of 2008 to 2009. In East Harlem, the price per square foot was $672 for the second quarter of 2009, almost 30 percent lower than the price per square foot below 96th Street on the Upper East Side. This past year also saw the opening of a Costco in East Harlem, the first in all of New York City.

But with the phasing in of the new zoning regulations and the complications brought on by the financial crisis, leaders of East Harlem are worried about the present housing reality more than the real estate panorama a decade from now. Opponents of the rezoning, led by New York City Councilwoman Inez Dickens, are worried about gentrification in the region.

“People here are not concerned about the effect the subway will have on their rent. It’s too far away,” said Robert Rodriguez, the chair of Community Board 11, which covers East Harlem. “Nobody’s thinking about it. What’s worrying them is the short term effect of the construction.”

For the last two years, construction has turned the area around 96th Street and Second Avenue into a sea of heavy equipment, fencing and narrowed sidewalks and streets. Street closings and traffic snarls are common everyday occurences. But those that can think in the long term see the inconveniences as temporary.

“The small radius around construction is not so thrilled,” said Barry Schneider, the co-chair of the Second Ave Task Force run out of Community Board  8.  ”But the people who are visionary and can see beyond the hole in the ground? Yes, they are happy.”

Among the major real estate firms doing business in the area, brokers from the Massey Knakal firm, even foresee the potential for a makeover of the area because of the new subway.

“The biggest boon will be for retail-driven buildings,” said Tom Gammino Jr., a broker at Massey. “Because of the new subway, people will be going over to Second Avenue. That will cause a demand for more services. And in turn, that will drive up the value of the area. For investors, some are willing to suffer in the short term during construction, because long term they know it’s a homerun.”

When the T line opens in 2018, the first stops will be at 96th, 86th and 72nd streets. And it’s safe to assume that the impact of the new market will be closer to 20 percent near the new subway stops, said Jeffrey Peisner, of the Ripco firm.

According to Colleen Power, an associate broker at DGK residential, some residents on the Upper East Side are already keeping their eyes on the futures market.

“Nobody wants to live where there’s construction going on,” she said. “But the decrease will be almost insignificant because a lot of people think in the back of their heads that their property will gain a lot of value once the subway is done. Incidentally, few people are selling and the ones who are buying now are paying almost as much as before the construction because they know it’s actually a good deal in the long term.”

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