Uniondale, N.Y. – The slow drip of new apartments into the Long Island market should swell to a trickle over the next few years, as a few new players enter the market.
One of those, the Lighthouse Development Group, plans to create what it calls a “modern suburban center” here. The $1.5 billion, mixed-use town center will include a new arena, office space and hundreds of apartments, townhouses and hotel condominiums.
Nassau County selected the group on March 16 to redevelop the 77-acre site of the old Nassau Veterans Memorial Coliseum. The developer will add the arena site to 72 contiguous acres it already owns, bringing the acreage total to 149.
The developers, who have been preparing for the project for several years, expect to begin construction in the summer of 2007 or 2008 and finish by 2013. But before work can begin, the plan needs to get through numerous public meetings and win the approval of the Nassau County Legislature and the Town of Hempstead, which includes Uniondale.
Locals have already firmly said “no” to the development group’s proposal for an “iconic” high-rise tower at the site, and the community will probably have more to say on the plan as it goes forward.
“It’s very wrapped up in local government here in Long Island,” said Laurène Gros-Daillon, spokesperson for the development group. Many local residents are highly skeptical of apartments, fearing that multifamily projects will lower their property values. It can take as long as six years for an apartment to win the right to build.
But once a project is finished, there’s very little chance that another developer will build next door and steal potential renters.
Only 3.8% of the apartments on Long Island were vacant in 2005. The increase in new construction should push that rate up to a still-healthy 4.7% by 2010, according to Reis, Inc., a New York-based market research firm. Meanwhile, the effective monthly rents should rise from an average of $1,403 in 2005 to $1,486 this year, and steadily climb between 2.5% and 4% a year to reach $1,654 a month in 2010, Reis’ projections show.
Developers added a miniscule number of units to Long Island’s rental stock last year, completing just 44 new apartments, according to Reis. That was an especially slow year, but even a typical year is quiet: 245 apartments were finished in 2004 and 256 in 2003.
Almost all of those were built by AvalonBay Communities, Inc., including the 298-unit first phase of Avalon Pines in Coram, N.Y., and the 256-unit first phase of Avalon at Glen Cove, both of which completed construction in 2004. Avalon Pines will eventually total 450 units set around a golf course while Avalon at Glen Cove will eventually total 367 mid-rise units.
“We don’t view Long Island as a market with market risk,” said Matt Whalen, vice president for AvalonBay. In recent years, the company has been responsible for much of the apartment development in suburban Long Island, with 500 units of housing under construction at six sites and another 1,000 apartments in the planning stage.
The cost of construction is another hurdle to building in Long Island: The hard cost of garden-style construction was $140 to $160 per square foot at Avalon Pines, while mid-rise construction cost $250 a square foot at Avalon at Glen Cove.
Conservative inventory growth
Despite the difficulties, a few developers are now considering new apartment projects, and their activity should add more units to the market. Between 2006 and 2010, Reis predicts the builders will finish an average of about 740 apartments a year, increasing the existing inventory of nearly 100,000 apartments by less than 1% a year. Many of these apartments are 40 or 50 years old.
The owners of these older buildings tend to hold them for years, making sales and valuation data hard to come by. For example, there weren’t enough major sales of apartment properties in Long Island for Real Capital Analytics, Inc., to put together an investment report.
Job growth is still strong on Long Island, which has created 22,000 new jobs in recent years. But builders only create 4,000 new homes a year for these workers, including both multifamily and single-family homes. In contrast, developers built 25,000 units of housing a year of all types throughout the 1970s, Whalen said.
The shortage of new units has driven rents up 18% over the last six years, a time when apartment owners elsewhere saw rents stagnate or decline. Nassau and Suffolk counties are short 250,000 units of housing, according to the Long Island Regional Planning Board.
Developers such as Lighthouse are hoping that as land in Long Island becomes harder to find for single-family homes, the shortage will make Long Islanders more open to the new condominiums and apartments they are planning.