Long Island City is said to be bracing for a serious development boom even before Amazon moves in. Early this year, much of the Long Island City neighborhood was already designated as an "opportunity zone" which is an area that will offer significant tax benefits for those who develop there.
Amazon is reported to have selected Long Island City for a major North American campus and will likely be getting generous tax breaks if it does so. The move is expected to bring thousands of brand new employees to Long Island City, which will help entice builders from all over.
Jessica Millett, co-chair of the tax department at Duval & Stachenfeld LLP, told Bloomberg: "We’ve been seeing so much activity in Long Island City. The opportunity-zone activity ramps it up a level. Amazon threw fuel on that fire -- my phone started exploding.”
New York Governor Andrew Cuomo continues to advocate for Long Island City as a place for Amazon to move, even joking that he would change his name to "Amazon Cuomo" in order to win over the company. Cuomo is widely expected to grant numerous additional concessions to the company for opening there, on top already being responsible for granting the "opportunity zone" designation.
And so, real estate developers and investors are all trying to raise money in order to take advantage of the tax breaks that will come in Long Island City. Many of them do this by taking capital gains and putting it into funds that target development and opportunity zones, which will defer taxes until 2026. This will also potentially reduce liabilities by as much is 15%, according to a new Bloomberg article.
If those who invest in the area wind up holding their investments for 10 years, they can defer paying capital gains on their appreciation. Real estate developers are seeking out these types of high growth areas where they can get the most bang for their tax benefit buck. Rules are apparently still being finalized by the federal government about what types of development are allowed to occur in these areas, but both towering residential towers and light commercial offices and retail space are expected to qualify.
This rounds out billions of dollars of investment that Long Island City has seen over the last couple of years, mostly due to the fact that it’s so close to Manhattan. Just last week, Mayor Bill de Blasio announced that he would dump another $180 million into the neighborhood's infrastructure, including upgrades to its sewer system and a new school.
Long Island City is already betting big that it'll be Amazon's new home, carelessly optimistically building 4,500 new residential units with another 1,700 proposed. Developers and brokers are reportedly concerned about the growing supply of residential units - a concern that Amazon could easily answer.
Sunder G. Jambunathan, co-founder of Certes Partners told Bloomberg: “Our concern in Long Island City has always been that a lot of new supply is coming online. There’s always been a question of: Is there enough demand? This solves that in a pretty direct way. It brings in demand. People who need housing, who need hotels, who need retail.”
It’s still unclear as to where Amazon could position itself in Long Island City, if it does wind up moving there. One thing is for certain, if it moves into the area it will help catalyze significant interest in Long Island City and kick the post-industrial area's development pace into overdrive.