Gentrification Crashing on the East River?

Vanishing New York brought my attention to this piece in the Times. It is interesting to consider what will happen to neighborhoods on 'the verge' with the current economic downturn. Locally, I'm particularly interested in how this plays out with the LIC condo boom. We've already seen a number of those new buildings accepting rental tenants when they can't sell units. This has sent some would-be owners scrambling to get out of their agreements before closing.

Long Island City is a fascinating test case of this sort of thing. There is so little residential neighborhood there compared to the number of new developments. It seems every bit the test-bed in engineering a neighborhood. I have no idea what it will all look like if/when these developments fail, but I'm curious to see. Not sure if this bodes terribly well for new establishments like Dutch Kills.

Astoria on the other hand seems relatively culturally intact. While the number of shops that have recently closed on Steinway Street isn't a good sign, this is every bit the pre-existing neighborhood. Already a mish-mash of cultures, Astoria will likely benefit in the long run from the slowing tide of gentrification. Most of the property here is rental property anyway, and the hiccups in redeveloping LIC will slow the hand of those who would like to tear down and redevelop the neighborhood. 

Successful newer establishments like Blackbird's have found a niche and steady local clientele. They've catered very well to the Astoria that actually exists, as opposed to a hypothetical neighborhood that could be.

Condo and Co-Op Crunch

As bad as the economy is, the worst is likely yet to come for those who live in condos and co-ops. Gothamist and Crain's are both reporting on skyrocketing maintenance fees for many Manhattan buildings, citing one Upper East Side co-op whose rates are shooting up 15%.

It is especially fierce in buildings that depend on retail and office rental income for their bottom line. Crain's notes:  "Ground-floor retail leases are major sources of revenue for many residential properties. For instance, such space in a building on Madison Avenue in the East 80s can fetch at least $300 a square foot. Retail rents can bring in millions of dollars, according to Faith Hope Consolo, chairman of Prudential Douglas Elliman's retail leasing and sales division."

With the retail vacancy rate in Manhattan closing in on 18%, the numbers look pretty grim there.

While there are advantages to buying in a depressed economy, condos and co-ops may be a really rough bet. Home-seekers may be better off renting for the time being. Who knows, maybe you can find your very own Greek temple.