Amazon Loss Stings, but Long Island City Real Estate Shrugs It Off

The urgent inquiries for office space from companies aiming to do business with Amazon.com Inc. have long ceased. The near-constant flurry of calls from would-be investors in commercial buildings and condominiums has eased.

But the real-estate market in Long Island City has done just fine in the year since Amazon nearly made it a new home. The Queens neighborhood was suddenly the hottest in New York City after the giant retailer said in November 2018 it would open a headquarters there, bringing 25,000 employees to the area. Long Island City was just as suddenly deflated by Amazon’s abrupt cancellation of those plans.

Even without Amazon as a neighbor, commercial-property owners have attracted new tenants, thanks to the area’s relatively low prices and the abundance of new office space.

They leased more than three times the amount of space in the first nine months of the year than they did in that period during the previous year, according to Cushman & Wakefield PLC. Sales of commercial buildings rose 9%, according to B6 Real Estate Advisors.The Amazon EffectWeekly sales jumped in Long Island City after Amazon announced its move there in November 2018.Source: Smith Report and city finance recordsNote: Sales based on the date a contract was signed and is only for sales that closed. Excludes contracts signed in new buildings that haven’t yet opened.

Condo sellers have shrugged off Amazon’s snub. In the third quarter, median asking condo prices were up 7.5% compared with the same period in 2018. Median condo sales prices climbed 7.7%, while asking rents were up 5.5%, according to figures compiled by StreetEasy.com. Long Island City outperformed the rest of the city on most measures, with gains in median rent being slightly higher in Manhattan.

Amazon’s brief commitment to the neighborhood “put Long Island City on the world stage,” said Thomas A. Donovan, a partner at B6 Real Estate Advisors. “Long Island City was already on the trajectory toward being a good downtown.”

The real-estate firm Savanna may have had the most dramatic reversal of fortune with the pullout of Amazon. The retailer had planned to take a million square feet that was soon to become vacant at Savanna’s One Court Square. Savanna worked quickly and signed a 332,000-square-foot lease with the health-care company Centene Corp.

The property owner also managed to woo back Altice USA, the cable company that had been squeezed out by Amazon’s commitment. Altice signed a deal for about 103,000 square feet at One Court Square.

Overall, owners of Long Island City office properties signed 1.2 million square feet of leases in the first three quarters of the year, far exceeding the 331,538 square feet recorded for the same period in 2018, according to Cushman. The vacancy rate, though still significant, dropped to 14.7% in the third quarter from 18.4% a year earlier, also indicating strong demand.

But asking rents for office space dipped 7.5% to $40.65 a square foot in the third quarter, the third straight quarter of decreases, according to Cushman.

“Prices have come down because there is a lot of space on the market,” said Neil Dolgin, co-president at the real-estate firm Kalmon Dolgin Affiliates Inc. “There is more supply than demand.”

As with the office market, Amazon’s announcement sparked a surge of activity in the residential market. At the time, groups of investors went from sales office to sales office by bus, and some brokers said they clinched deals by cellphone.

In February, when Amazon backed out and the music stopped, sales continued although at a slower pace in the midst of a broader slowdown in condominium sales in the city. The number of investor-buyers looking for studio and one-bedroom apartments is down, brokers said, but purchases by people from Manhattan looking for larger apartments are up.

Amazon said it had planned to develop a new office campus along the East River, in an area known as Anable Basin. Now developer MaryAnne Gilmartin, chief executive of L&L MAG, and two other firms that control property in the area said they are talking to local residents and businesses about developing there.

L&L MAG is still “bullish on the location with or without Amazon,” Ms. Gilmartin said.

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Unions at bay, but hostility for real estate worse than ever

Inside an elegant dining room at the Pierre hotel Thursday, panel moderator Robert Blumenthal scanned the floor — packed with real estate’s biggest names — for signs of unrest.

It was a decidedly calmer scene than at the same Schack Institute of Real Estate capital markets conference a year ago, when protesters interrupted the panel discussion to blast Stephen Ross, the Related Companies chairman, whose firm was in a dispute with unionized construction workers.

“I’m glad we’re all here again,” Blumenthal quipped. “We also have more security this year.”

Ross, who shared the stage with fellow industry titans Marty Burger, MaryAnne Gilmartin, Scott Rechler and William Rudin, noted that the dispute between the Building Construction Trades Council and Related Companies was settled this year and the labor group has stopped protesting Related’s use of nonunion labor at Hudson Yards.

Rudin said the deal had paved the way for an agreement between the Real Estate Board of New York and the Building and Construction Trades Council, which was announced last week.

But the conversation took on a more serious tone as the panelists discussed the recent shift in the state legislature.

“I’m anxious of what’s happening in Albany,” said Rechler, chairman and CEO of RXR Realty. “I don’t think we’ve ever operated in such an anti-business, anti-real estate environment.”

He added, “We’re talked about by the activists as the enemy. You think about Occupy Wall Street after the banks collapsed — we’re that today; real estate’s that today. And that’s a tough place to be.”

Said Ross: “Those forces that kept Amazon out are still very active.”

When asked about WeWork, the panelists had mixed views about what is next for the struggling co-working company.

“I’m not worried,” said Rudin, CEO and co-chairman of Rudin Management Company, which has a new building at the Brooklyn Navy Yard, Dock 72, anchored by WeWork. Co-working is an important part of the real estate ecosystem, he said, and “here to stay.”

Ross noted it was still uncertain what would happen to shared office space companies if the economy retrenches. “We’re going to have a recession at some point,” he said. “And seeing if these companies that are in those short-term spaces that are not really highly capitalized are able to survive, and what will happen with that short-term space.”

Still, Related’s new lease with Facebook was seen as a positive sign for New York’s tech industry.

In Long Island City, Gilmartin said her team had been working for the last year on a district-wide innovation plan for the waterfront, which was to house Amazon’s new headquarters before the company withdrew nine months ago.

“While the political calculus around Amazon was off and wrong in so many ways, the economic and location analysis was spot on,” said Gilmartin. “Last year, were in negotiations to partner with a large landowner in Long Island City and shook hands on that site on Valentine’s Day … a few hours after Amazon pulled out.”

She continued, “I think the lessons learned have helped us go back to Long Island City and say, ‘What has to be different?’”

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‘She Build’: Creating an All-Women Real Estate Development Team

Taya Cook of Urban Capital, left, and Sherry Larjani of Spotlight Development are leading an all-women team to develop a 200-unit condominium building in Toronto. Credit…Aaron Vincent Elkaim for The New York Times

As a highly successful woman in New York’s male-dominated development arena, MaryAnne Gilmartin has a “mini-obsession”: She wants to oversee a commercial real estate project in which every part of the process is headed by a woman.

Ms. Gilmartin, the founder of L&L MAG, a real estate development company, knows from experience how to run a real estate project. As the chief executive of Forest City Ratner Companies, she oversaw such prominent projects as the Barclays Center in Brooklyn and the Renzo Piano-designed New York Times building in Manhattan.

Now, she has set her sights on doing the same with an all-women team. Ms. Gilmartin calls it a “she build,” and she knows “exactly where to go to find the right woman for every single part of the deal,” she said.

Her biggest challenge is securing the capital — the idea does not get a lot of traction in a room full of male investors, she said. But she is working at it, believing that if she can make such a project happen in New York, it will serve as a beacon to other aspiring developers who are women.

“We outliers have to keep at it,” Ms. Gilmartin, 55, said.

That’s because, despite progress in many other professional realms, women remain severely underrepresented in real estate development and investment, particularly in senior roles

Women held just 4 percent of senior investment roles at major real estate firms, according to a widely circulated 2011 study, and their numbers have improved only “marginally” since, said the study’s author, Nori Gerardo Lietz, who is a senior lecturer at Harvard Business School and a longtime real estate investor.

Ms. Lietz reviewed the senior ranks of 82 major real estate investment firms for the study, as well as many more private equity and venture capital firms, and found that women were noticeably absent from the most highly paid, “touch the money” jobs.

Her study attributed the gap to a combination of factors, including institutional sexism and more mentoring attention being paid to men than to women.

Eight years later, “the larger firms are trying to open up the funnel and get women in,” she said. “But they’ve not done a good job at retaining them.”

Firms should try harder to keep female employees on track, Ms. Lietz said, perhaps with policies for new mothers that allow them to balance the 80-hour workweeks required during transactions with time off.

One of the firms in Ms. Lietz’s study was Stockbridge, a real estate investment management firm in San Francisco with nearly $15 billion in assets. At the time, women held 17 percent of the firm’s senior finance positions. Today, the percentage is closer to 30 across all of Stockbridge’s senior positions, including finance, according to Kristin Renaudin, the firm’s chief financial officer.

Ms. Renaudin, 42, said she saw a growing number of women involved in real estate investment — all of the main players working with her on a major real estate portfolio purchase earlier this year were women. But the pipeline of candidates for the deal-making jobs is still heavily male, she said.THE MORNING: Make sense of the day’s news and ideas. David Leonhardt and Times journalists guide you through what’s happening — and why it matters.Sign Up

“The transactional, investment side is the last to come around,” Ms. Renaudin said. That was partly because many women did not pursue those jobs, she said, either because they are put off by a difficult-to-shake stigma that deal-making is a male-oriented culture or, if they have families, because they are discouraged by the significant travel and often-unpredictable work schedule.

Family life is definitely a factor, said Melissa Burch, 43, the executive general manager for New York development at Lendlease, a multinational property and infrastructure firm.

“These roles are all consuming when the deal is hot,” she said. “You have to be ready to sprint when the opening is there, and that unpredictability can be unappealing.”

Ms. Renaudin said she had been fortunate to have had “no shortage of opportunities” at Stockbridge, but recognized that she was a rarity in the industry. In fact, throughout her 21-year career, she has not had one female mentor or role model, she said.

That lack of role models could also hinder women’s rise up the ladder, said Taya Cook, the director of development at Urban Capital, a condominium development firm in Toronto.

“There are women I look up to in the industry, but they haven’t acted as mentors or role models,” she said. “I’d like to provide that for the younger generation.”

Ms. Cook hopes to do that with her own version of a “she build.” She and Sherry Larjani, the managing partner at Spotlight Development, also in Toronto, are leading a handpicked, all-women team to develop a 200-unit condominium building called Reina (the Spanish word for queen) in the Etobicoke district of Toronto.

The idea came last year after Ms. Cook, 38, read a Toronto Life magazine article that highlighted the city’s leading condo developers. All 20 were men.

“Honestly, it’s insane,” she said. “When you step back and have a look, it’s probably one of the last industries that’s really just so unbalanced.”

Ms. Cook noted that the backing of Urban Capital, which is run by two men, had eased the path to financing. Without their successful history behind her, “I would expect the experience to be much more difficult,” she said. “Finance is definitely on par with construction and development as a boys’ club.”

The Reina project has garnered considerable publicity in the Toronto area, said Ms. Larjani, also 38. Like Ms. Cook, she hopes the publicity will draw more young women into development.

“The point is to show that these women are working in all these roles, and they are roles you can take on,” Ms. Larjani said.

Ms. Gilmartin said that she never felt intimidated or thwarted at the table by men, but that young women coming out of top business schools “looking at a landscape of males” could have trouble seeing a way to break through.

“There are just not enough examples for these women,” she said.

Ms. Burch said that women should feel confident that if they can just “get into the room,” even if it is filled with men, they will figure out how to use their talents to rise.

She spent the first 13 years of her career at Forest City Ratner, where, she said, she started out as a “human clicker,” running the digital portion of presentations that the company co-founder Bruce Ratner made to investors. Just sitting in on dozens of those presentations was instructive.

“I soaked in every one of those conversations,” Ms. Burch said. “How do you convince investors? How do you lay forth a vision and bring others along?”

Eventually, she jumped in and made some of those presentations herself, and later worked closely with Ms. Gilmartin. Now, she’s hiring women for her own team at Lendlease, including one who’s in charge of acquisitions.

“She’d been in development for 10 years and never had a female boss,” Ms. Burch said of the woman she hired. “She told me one of the big reasons she came here was to have that. It was important to her.”

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Owners Magazine 2019: Talking With the Top Developers and Owners of NYC

MaryAnne Gilmartin CEO, L&L MAG 

Do you think we’re heading into a downturn? Why or why not? New York’s fundamentals are strong, but I do see a correction, if not a modest downturn, which creates big opportunities for folks like us. 

What do you think the future looks like for WeWork and other coworking operators if the economy slows down? While there’s plenty of culpability to go around, WeWork’s troubles are largely its own doing. I think it will course correct, right-size itself, and adjust the market’s expectations. 

Is New York City losing its shine? Are property investors starting to look elsewhere? Political headwinds and the cost of doing business make it ever more challenging to build and operate here. New York remains the global capital of the world, but the barriers to entry keep getting higher and higher. Again, we will create opportunities due to this. 

How have you adjusted your business plan since the new rent laws were passed? We will concentrate our building in neighborhoods where the majority of the market rents are already over $2,000 per month. With this strategy, we still have a multifamily business in new construction. That said, we are borough builders too and the new rent laws are foreboding for areas outside of the urban core — hopefully time will produce a political awakening up in Albany. 

Do the new rent laws present any opportunities for savvy owners? Other than producing a less cluttered field of developers, the new laws present more of a workaround than an opportunity for savvy developers. 

Is REBNY in need of a revamp? A lot. 

What’s the biggest headache in your job that no one knows about? This job is full of headaches for all of us in this business. That’s what keeps it fun and real. Telling you how I cope with them would be revealing my secret sauce. 

What’s more important: having the best lawyer or having the best accountant? Having the best lawyer with an accounting background. 

Most underrated neighborhood in the city? Bushwick. 

If you could pick the Republican and Democratic nominees for President, who would they be? I’m not foolish enough to answer that question. 

LIGHTNING ROUND: 

Favorite book? Elena Ferrante’s Neapolitan novels 

Favorite restaurant? Crown Shy 

Favorite vacation spot? Maldives 

Favorite TV show? “Fleabag” 

Favorite movie? Too many good ones to pick 

Favorite sport? 10th grade girls’ volleyball 

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