Submarkets with public transportation access have significantly stronger office fundamentals compared to those without transit, according to the Transit Served Market Report 2017. Vacancy in transit-accessible submarkets is 370 basis points lower than in non-accessible ones, while rents are 79.5 percent higher. And New York City has some new mass transit options that are opening up new geographies and submarkets.
Why does location matter?
If you’re an investor or developer seeking long-term holds, your asset is more likely to show strong performance if it is placed in a transit-served market. Additionally, you are more likely to attract diverse, millennial talent to such a location due to accessibility to amenities and easier commutes.
But what if you’re already in a market with few transit options? There are a few ways you can improve your situation. Owners of more traditional corporate office parks should adopt proactive strategies to preserve or grow their occupancy given changing workforce preferences favoring more urbanized locations. In short, to appeal to target tenants and the millennial talent force:
- Reposition your asset to include newer and more in-demand amenities
- Support walkability
- Offer transportation to and from the nearest public transportation station
Second Avenue Subway
The Lexington Avenue Line of the New York City Subway is the busiest rapid transit line in the United States, carrying roughly 1.3 million people per day, and is a huge example of a transit system serving a new market. The Second Avenue Subway, which opened after a decade of construction in 2017, will shift many riders away from the line and open up faster commutes to the western half of Midtown, further bolstering its appeal to both occupiers and investors. It will also support the Upper East Side’s multifamily real estate market by allowing for increased housing, and the potential for higher residential rents due to increased accessibility.
East Side Access and the Long Island Railroad
Complementing the Second Avenue Subway, the East Side Access project will create an alternate terminal for Long Island Rail Road commuters at Grand Central, reducing pressure on overcrowded subway lines. Grand Central is also at the heart of the Midtown East rezoning precinct, which could allow new opportunities for diverse development. With a new wave of commuters coming gaining access to a re-zoned Midtown East, the submarket is potentially more attractive than ever to investors and developers, alike.
Also at Grand Central, new construction such as One Vanderbilt will offer quality office space directly accessible to that Second Avenue Line, Metro North trains and now the Long Island Rail Road. Couple this brand new office space with unlimited access to commuting talent, and you have an asset with unlimited potential. Perhaps the subway line and new LIRR tracks will attract investors and developers to explore the New York City office market like never before.