Manhattan Multifamily Building Sales Slow in 2017 after 2016 Surge

by David Cohen

In 2017, the multifamily investment sales market in New York City followed the trends seen within the broader market with sales volumes dropping while property values were mixed. The year ended on a high note with regard to contract execution activity, which bodes well for sales volume in 2018. This year, we expect volumes to rise while values bottom out and start to climb by the end of the year as positive movements in fundamentals start to exert upward pressure on property values. 

With regard to the number of properties sold, there were 1,215 apartment buildings sold last year, down 19 percent from the 1,507 that were sold in 2016. The elevator building sector, which we differentiate from walk-up buildings as a separate asset class, performed better with 235 sales, down 14 percent from the 273 elevator buildings that were sold in 2016. In the walk-up sector, there were 980 sales, down 21 percent from the 1,234 walk-up buildings that were sold in 2016.

Robert Knakal Chairman, New York Investment Sales, Cushman & Wakefield

Robert Knakal
Chairman, New York Investment Sales,
Cushman & Wakefield

If we compare the Manhattan submarket to the outer boroughs, we see that activity in the outer boroughs held up much better than in Manhattan. In the outer boroughs, elevator building sales dropped by 13 percent to 182 last year while walk-up buildings dropped 18 percent to 882 sales. In the Manhattan submarket, elevator buildings dropped by 17 percent to a total of 53, while walk-up properties dropped by 36 percent to 98 sales for the year. 

The dollar volume of sales showed even more acute drops than the number of properties sold. Citywide in 2017, the dollar volume of apartment building sales was $8.2 billion, down 39 percent from $13.4 billion in 2016. Walk-up buildings performed better with a total sales volume of $3.8 billion, down 21 percent from the $4.8 billion of sales volume 2016. In the -elevator sector, total dollar volume was approximately half of what it was the year before. In 2017, there were $4.5 billion of elevator buildings sold citywide, down from $8.6 billion in 2016.

When comparing the Manhattan submarket with the outer boroughs, we see that the outer boroughs also performed better than the Manhattan submarket with regard to the dollar volume metric. The outer boroughs saw $5.6 billion of sales activity, down 26 percent from the $7.6 billion of sales recorded in 2016. In the Manhattan submarket, activity was off by a whopping 56 percent in 2017. Last year, there were $2.6 billion of apartment building sales, down 56 percent from the $5.9 billion in 2016. 

In the walk-up sector, the dollar volume of sales was down 31 percent in the outer boroughs compared to a drop of 37 percent in the Manhattan submarket. In the elevator sector, the dollar volume of sales was down by 22 percent in the outer boroughs and down a massive 61 percent in the Manhattan submarket. 

With regard to the New York City multifamily market, property values were mixed in 2017. Overall, apartment building sales averaged $442 per square foot, an increase from the $412 average in 2016. Walk-up buildings saw their average increase to $429 per square foot, from the $391 average in 2016. In the elevator sector, property values averaged $503 per square foot, down from a $514 average in 2016.

As was the case with the broader investment sales market, in the Manhattan submarket, values for both walk-up and elevator buildings fell last year, 3 percent for walk-up buildings and 2 percent for elevator properties. Values in the outer boroughs were mixed, with some sectors increasing in value while others dropped. 

The good news in all of this is that while the broader investment sales market is in the 30th month of a market correction, the multifamily sector has held up better than any other. This has historically been the case and it is good to see it continuing to be the case today. 

We believe that 2018 will be a transitional year. As prices reach their floor and the volume of sales picks up, everything looks positive for the market moving forward. 

By Robert Knakal, chairman, New York investment sales, Cushman & Wakefield. This article first appeared in the March/April 2018 issue of Northeast Real Estate Business magazine.

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