Posted by Jonathan J. Miller -Thursday, February 23, 2012, 5:49 PM
In one of the greatest column names ever devised during the illustrious history of the New York Times known as “The Appraisal” [wink], Elizabeth Harris, pens “Amid a Subway Project’s Dust and Noise, No Complaints About the Rent” about the war zone that is Second Avenue on the Upper East Side of Manhattan. I was on vacation when this was published earlier this week and I was forbidden to bring my laptop.
I was approached to try to take a stab at measuring the impact of the Second Avenue subway construction on the local housing market. Listen to the blasting.
Sales transactions move too slowly to capture the neighborhood impact since this is a relatively recent event of the past few years. So I looked at rents since they are smaller and more nimble.
I divided a portion of the Upper East Side neighborhood into three zones (East 64th Street to East 96th Street) as follows:
- The blocks to the east and west of Second Avenue (Third Avenue to First Avenue)
- The blocks to the west of Third Avenue (to Fifth Avenue)
- The blocks to the east of First Avenue (to East River)
I analyzed all the properties collected during our production of the The Elliman Report: Manhattan Rentals that actually rented in 2010 and 2011 and compared them. In a rental housing market that is seeing sharp gains in rents in the past year, I thought it would be interesting to see if there was a material difference in direction between the subway “zone” and everywhere else. I was only looking at “face” rents (the rent paid before deducting concessions) because I have more of that data.
And there was a difference.
In fact, the subway zone showed a 1.7% decline in median rent year-over-year, a 3.2% increase to the west and a 2% increase to the east. And the number of rentals in the subway zone increased 9% while the areas to the west and east fell 5.1% and increased 2% respectively over the same period suggesting that increased affordability may be attracting tenants.
Construction was supposed to be completed by 2016, but now it looks like 2018 or longer.
While I was on vacation, I was contacted by Eyewitness News to discuss my numbers on camera but that wasn’t possible – although the online story includes no mention of the source of the results, the video did provide proper credit.
As time moves closer to completion some buyers may benefit from upside given how unpleasant some blocks are right now. The construction will likely provide downward pressure on housing prices in the near term but those along the zone will likely catch-up and perhaps even benefit from the transportation upgrade.
As a general rule, neighborhood property values tend to be higher in the west and lower in the east. It’s also possible that the price midpoint may shift further to the east than it is now once construction is completed.
Location specifics aside, additional subway access to and from the neighborhood should prove to be a tremendous asset to property owners in that area over the long run.