NEW YORK--(BUSINESS WIRE)--In 2012, Hurricane Sandy flooded Brooklyn's L train infrastructure with seven million gallons of saltwater, leaving behind significant damage. The train tunnel will be closing for repairs, and nearly three out of four (71%) commercial real estate executives expect Brooklyn property values to decline during this restoration process, according to Marks Paneth's most recent Gotham Commercial Real Estate Monitor.
What's worse, since a timeline has yet to be established for the repair work, nobody knows how negative - or how long - the impact of the closure will be. The Metropolitan Transit Authority (MTA) does not expect to award a contract for the project before the end of 2016. It is still unclear how the L train will operate during the restoration.
The L train is a critical component of cross-town transportation, running ten miles from west Manhattan to southeastern Brooklyn. According to the MTA, nearly a quarter of a million people ride the L train between these two points every weekday.
Opinions among CRE executives are divided as to whether Brooklynites will move due to the closure. Although 47 percent do not believe that residents will move, 38 percent think they will.
Who is right? It depends, in part, on where commuters live and whether they own or rent.
The L train closure is especially likely to affect the Williamsburg and Bushwick neighborhoods in Brooklyn. The majority of people who live in these neighborhoods are renters, not owners. Renters are more likely to move, which may push prices down.
William Jennings, partner-in-charge of Marks Paneth's Real Estate Group, believes there may be a silver lining: "In neighborhoods like Bedford-Stuyvesant or Greenpoint, which have access to other modes of transit, prices may actually rise as renters migrate to neighborhoods unaffected by the closure."
A quarter of executives surveyed agreed that prices in neighborhoods unaffected by the L train closure could very well increase.
Mr. Jennings also pointed out that any downturn resulting from the L train closure may create buying opportunities: "It will be interesting to see where the smart money invests. I wouldn't be surprised if demand for office space increases in Brooklyn, as companies attempt to accommodate residents affected by the closure."
The survey was completed by 145 professionals working in New York City commercial real estate, including legal counsel, bankers and lenders, brokers and agents, developers, property managers and owners. The results reported here are based on completed self-administered surveys, fielded in late February and early March, 2016.
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