FIVE KEYS TO INVESTING WISELY IN A REVITALIZED NEIGHBORHOOD

Wednesday July 3, 2019 | by Louis Adler, Forbes

Most New York City neighborhoods have been overrun with starchitect-designed glassy skyscrapers that may be stunning to admire your reflection in but do not reflect their neighborhoods. More often than not, I find that new developments lack the context, history and scale of their respective communities. Despite enormous growth over the past decade, the Lower East Side (LES) remains a solidly distinctive neighborhood with a grassroots, mom-and-pop personality that is all New York.

 

My partner, Robert Rahmanian, and I started REAL New York six years ago. We were attracted to the Lower East Side because of its rich history, diverse population, distinctive New York character and architecture, and great connectedness to the rest of the city. We attribute our firm’s success in the Lower East Side neighborhood to the fact that we are a nimble, privately owned brokerage that has been able to relate to the noncorporate, small landlords that still make up this neighborhood.

 

The combination of relating to and respecting a neighborhood’s history while attracting new residents who want to build on that, versus obliterate it, is the key to growing older neighborhoods. Neighborhoods always evolve, but keeping on the historical trajectory makes more sense than starting from scratch, especially when it’s so rich. For us, we have extended this formula to our Brooklyn and Chelsea offices.

 

While every area is unique in its own way, in the case of the Lower East Side, I have identified five things it takes to grow the future of a neighborhood that retains its past. When researching an up-and-coming older neighborhood to invest in, I believe this example can offer some key guidelines to ensure your investment is a wise one.

 

Honor the neighborhood’s grassroots.

 

The recently opened 37,000-square foot Essex Market food hall is an impressive example of how to transform a dingy, city-owned parking lot to an architecturally impressive, bright, open space with a super-hip vibe. But, even more noteworthy is that it is not a depersonalized, one-size-fits-all food hall filled with national franchises. Essex Market features the mom-and-pop local shops that made the LES what it is today.

 

It could have easily been filled with national chains that pay high rents, but it was purposely designed and built to be a mirror of its community. New York magazine perfectly summed up the success of the Essex Crossing mega-development by observing, “The result is neither a new high-gloss enclave nor a bastion of 1970s anarchy, but a place that’s just messy, dense and motley enough to feel like New York again.”

 

Blending new and old is a delicate balance. But, respecting the history of a neighborhood by providing housing and retail options for existing residents while also creating new, shinier options to attract more investment and new residents is key so that Trader Joe’s can co-exist alongside Joe’s Fabrics (a local, family-run upholstery business).

 

Foster culture.

 

In the 19th century, the LES was home to a diverse group of people, from Germans to Jewish immigrants. In the 1950s, it was the epicenter of the Beat poets, and soon, other artists, musicians and hippies followed. Today, the LES continues its strong cultural traditions, from its nearly 100 art galleries to the Tenement Museum, which highlights the rich history of the neighborhood, to the International Center of Photography (ICP).

 

Neighborhoods that have distinct identities rooted in culture and the arts provide solid foundations to build on to attract new residents, visitors and investors. Educating people about the past, as in the case of the Tenement Museum, while looking to the future, as with the ICP, takes the best of the LES to create a new foundation to build on.

 

Look to the past to inform the future.

 

The traditional architecture of the LES was filled with low-rise tenements to house the working class. Although a few supertalls are encroaching around the neighborhood, the LES remains a neighborhood for “real” people to live. There is still value to be found in smaller, attractive buildings. I find that a common theme for all successful rental products here is the nod to the past.

 

The LES has height restrictions, so no new building can be over six stories. Before 2008, there was a period when the restrictions were lifted, so you will see some taller buildings in the area. But, in general, the building heights remain low, which both preserves the character of the neighborhood as well as the amount of supply of housing on the market. 

 

I find both of these things to be good for the health of the real estate market. Investors should pay attention to how a revitalized neighborhood maintains its traditional architecture.

 

Stay connected.

 

Although New York City is on an island and is one of the most vibrant cities in the world, unless a neighborhood has good transportation links, it can feel cut off (think about the Upper East Side’s struggles before the Second Avenue subway extension).

 

A neighborhood has to have the ability to easily get people in and out -- an important consideration for investors researching any area. The LES has bus, subway and bike options, and it also recently got a new ferry landing. 

Relate to the community.

 

Finally, Essex Crossing is a superb example of how to relate to the local community, which is a critical component in growing the future of a neighborhood while maintaining its past. Future retail and residential developers should take notice.

 

To be a success in any market, you need to delicately blend modernity with the traditional qualities that are unique to the neighborhood. And, most importantly, you must understand and respect the culture and history.