July 2, 2015 By Christian Murray
It simply comes down to supply and demand.
The Long Island City rental market is flat lining as an endless supply of new apartments continues to hit the market. Meanwhile, condo prices are skyrocketing as the product remains scarce.
The average condo price in Long Island City jumped more than 32 percent in the second quarter of 2015, to $935,000, up from $705,000 for the second quarter a year ago, according to the Modern Spaces 2Q 2015 Market Report released today.
Meanwhile, the average rent paid for a luxury Long Island City apartment rose 6.7 percent in the second quarter, to $4,290, compared to $4,017 in 2Q14.
Despite the leveling off of the rental market, 95 percent of the 20,000 units that are in the planning stages or are in construction are going to be rentals, according to Modern Spaces founder and chief executive Eric Benaim. Just 5 percent of those units will be condos.
Benaim said that many of these new apartment buildings have been planned for years and that developers were able to purchase land when prices were significantly lower—making rental buildings more attractive.
However, with land prices so high developers are going to focus more on condos, especially with the strong market. Developers make more per square foot on condos than rentals.
Frank Monterisi, of the Related Companies, who spoke at the LIC Summit last month, said: “With current land prices where they are, and current construction costs where they are, the concept of doing a rental at this point doesn’t really make sense.”
The average condo price paid for a studio in Long Island City jumped 59 percent to $678,000 for the second quarter, compared to 2Q14. One bedroom units rose 37 percent to 939,750—up from $687,486 a year ago. Additionally, the average two bedroom condo sold for $1.19 million, up 19 percent from $999,600 in 2Q14.
Benaim expects condo prices to continue to rise over the next two years as demand continues to increase. However, he is less certain of the rental market as thousands of rental units are slated to go up in the neighborhood.
The average rent of a one bedroom luxury apartment was $3,134 during the second quarter, almost flat with the $3,158 paid for a one bedroom in 2Q14. Studios too were about the same as a year ago, at $2,541.
The only significant increase came with the bigger apartments. Two bedroom apartments were up 5 percent to $4,788, while three bedrooms jumped nearly 16 percent to $6,697 from 2Q14.
Disclosure: Modern Spaces advertises with LICPost