Tunnel Vision

Could the L Train Shutdown Actually Be a Good Thing for Renters?

The 15-month subway closure might finally make north Brooklyn (somewhat) affordable.

by John Surico
Jun 8 2017, 4:38pm

Photo via Meshae Studios

In early 2019 the L train in New York City will shut down for 15 months to repair damage caused during Hurricane Sandy. Leading up to the closure, VICE will be providing relevant updates and proposals, as well as profiles of community members and businesses along the affected route in a series we're calling Tunnel Vision. Read more about the project here .

What has happened in North Brooklyn over the last decade is the stuff of real estate legend. A 126 percent spike in population, on just seven blocks. Tens of thousands of new apartment units, reportedly by 2019. Record-high prices that seem to be climbing just as fast as the condos themselves. A waterfront long defunct from a manufacturing exodus—formerly a hot spot for drugs, crime, and dropping off bodies—is now one of the "hottest" square miles of development in the Western world. And like any urban migration, it came with time, and controversy.

To understand how this happened, it's important to look at the city's recent history. As overall crime rates in New York began to fall in the early aughts, Brooklyn shed its reputation as Manhattan's more dangerous kid brother and attitudes about the borough changed. Creatives came first for cheap studios, and then, naturally, so did developments and strollers. But the real crux was proximity: North Brooklyn was close enough to Manhattan (where costs are now, in some places, comparatively cheaper), palatable to those who wanted to "explore" Brooklyn's lower prices, but not stray too far away from the city. And you had the L train, a subway line that could get you back there in minutes.

But what happens when that convenience is gone?

Perhaps the most widely-discussed phenomenon surrounding the L train shutdown is how it'll impact the housing market—namely, what'll happen to one of the biggest bubbles in urban real estate once its linchpin is taken out for 15 months. Here you have a train that services 225,000 commuters between Manhattan and Brooklyn daily, thousands of whom are recent transplants, who came here largely because of that train. If that no longer exists, where will they go? ( The New York Times attempted to answer that last week.)

At first, the question kept landlords and developers up at night. When the news of the shutdown broke in 2016, the tone was apocalyptic—brokers spoke of a coming storm, as prices quickly plummeted, seemingly in reaction. But since then, that chatter has died down, with markets stabilizing, and talks of diaspora dampened. And as a clearer timeline of the shutdown emerges, the conversation has sort of shifted, from one of harm, to one of—who knows?—maybe even some benefit.

Tim King was one of those early prophets of doom. In April of 2016, he said the shutdown would be like "when the bow of the Titanic met the iceberg"—at least for businesses. The managing partner of CPEX Real Estate, King has been labeled "the maven of all things Brooklyn," and one of the more influential real estate voices in New York City. So his word carried weight.

But a year later, King has changed his tune a bit.

"Early on, when announcements were made, you had this 'sky is falling' kind of stuff, and that may still happen in the weeks before," King told me in an interview. "But at this point in time, the story is so talked about, and such an issue, that you have people who may not move, but who considered, and people who took a lease, who may not do it again."

Any sort of impact, he explains, has "been baked into the cake already," to a large extent, as real estate is long-range. He argues that the sheer amount of coverage surrounding the shutdown is a good thing—it encourages rational judgment, and planning. And New Yorkers, he says, are very resourceful: when faced with adversity, they find an alternative. (Although he is skeptical of the MTA's 15-month deadline.)

As inconvenient as it might be, the shutdown is bound to create "winners and losers," King says, from the bike rental shops who may flourish with more riders, to the restaurants who might falter with less resulting foot traffic. And the area's skyrocketing prices will likely slow during the shutdown, as owners are forced to adjust their expectations. "If you and I want to open a gallery, we could spark a good deal," he noted.

But there is something to be said for the ones who stick it out. The real story, he said, is not what'll happen to North Brooklyn before or during the shutdown, but after.

"When it's all done, this will be one of the most modern sections of rail in the city—it's got to go down for a while, before it goes up," he told me. "[The person] creating a co-working space in Bushwick is going to be the beneficiary of this. When the train starts running again, they might be seen as geniuses."

That forward-looking mentality should come as no surprise. Real estate is about finding opportunity, and capitalizing on it. It's also about knowing where value is—or, isn't.

"I think reliance on the subway has gone down alone. [Apartments] don't get the bump anymore from being close to subway," Jeffrey Schleider told me. "All of this stuff—a new functional ferry, ride-hailing apps, CitiBike—are really serious, cost-effective alternatives. So it's reasonable to say that there are elements in play that will reduce the impact of that effect. And ridership is becoming less and less relevant each year."

Schleider, a senior vice president at the major real estate company, Citi Habitat, and a resident of North Brooklyn himself, downplayed the shutdown's significance within the market, the moment of panic long past. "Everyone's looking at the end date of the work, and the closer we get, the less impact it'll have," he noted.

Sure, he says, residents and developers will flock to properties off of the nearby J/M/Z and G lines, which has already been happening. But the center of industry has largely shifted—Brooklynites, more often than not, are working and staying in Brooklyn (the real impact from the shutdown, he admitted, was further out on the line). And besides, tenants could probably get a good deal if they stay.

"It's going to be who's flinching first—which developer drops the rent first?" he told me. "You have huge developments with thousands of units coming online, and maybe you'll have a free month, no broker's fee, or paying for Via or Uber. But I'm not sure if you're going to see rental leases go down."

That opens the door, he added, to "opportunist renters"—the people that already live in the area, who might have a better shot at negotiating a lower lease price with their landlords. Don't always expect the $200 to $450 drop that FiveThirtyEight has suggested, but shoot for something. "I think a tenant who wants the best deal, as the shutdown comes close, should offer to take a two-year lease at a hefty discount," he explains.

Meanwhile, for buyers and sellers, Schleider says, waiting out the L train shutdown is like playing the long game. Because when the train returns, everything will change. New York City, in the end, is a business, and even a transit crisis can be profitable, if marketed well.

"People who own in Williamsburg are just waiting for 2020," he told me. "The expectation is that you're not going to see a lot of transaction value in 2018, 2019. Sellers don't want to sell for a discount, and buyers don't want to get into that."

"All of a sudden you have one of the hottest neighborhoods in the city with approachable prices, because other nabes went up, with a flurry of activity," he continues. "And after that, Williamsburg is a place with a brand new subway, retailers, and everything come backs online.

"It'll take a pause in its growth, and then it'll be ready to explode."

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