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NYC Multifamily Market Shows No Sign of Slowing Down

SHIMON-SHKURY-Ariel-Property-Advisors

Shimon Shkury,
Ariel Property Advisors

New York City’s multifamily market in the second quarter of 2015 was able to continue the momentum of 2015’s first quarter and generate an impressive $3.30 billion in gross consideration. The quarter also saw 364 properties trade over 225 transactions, which is a 33 percent increase in transaction volume compared to the same quarter last year. Boosting significant growth, both Brooklyn and Manhattan saw a number of institutional and portfolio deals again this quarter. Of the trades in Manhattan, the top 10 percent made up approximately 73 percent of Manhattans dollar volume and four of the five largest multifamily transactions to occur in NYC happened in Brooklyn, which contributed to both submarkets ending the quarter with dollar volumes above $1 billion for the second time in as many quarters.

Pricing throughout the city continues to evolve by most measures. Gross rent multiples have increased by 1.4 year-over-year and the average price per square foot in Manhattan has eclipsed $900. Compared to last year, average capitalization rates were down 60 basis points in The Bronx, and are down in Brooklyn and Northern Manhattan. These are the signs of solid fundamentals in the market.

Institutional caliber multifamily deals had a big second quarter in Brooklyn as the borough saw six transactions trade for more than $35 million — two of which surpassed $150 million each. Leading the way was Kushner Companies and LIVWRK, who purchased 184 Kent Avenue, a 374,274 square foot luxury rental building, for $275 million, or $792 per square foot. The partnership plans to convert the building to condominiums, following a trend more commonly seen in large Manhattan multifamily trades.

Manhattan continues to attract investors from all over the world, as both institutional funds and small investors alike look to take advantage of the sub-market’s safe-haven. Akelius Real Estate Management, the U.S. branch of a Swedish investment firm, made a large splash this quarter with the $167.5 million purchase of 362-372 Second Avenue, a 211-unit elevatored building in Gramercy, translating to just north of $900 per square foot.
Northern Manhattan’s dollar volume jumped 24 percent compared to the 2Q14 as pricing in the sub-market has heated up and more single-asset trades occurred. One highlight was the sale of 1501 Lexington Avenue at the border of East Harlem and Carnegie Hill, just one block north of the 96th Street subway stop. The 161-unit mixed-use elevatored building sold for $92 million, which translates to approximately $690 per square foot.

The Bronx had a very strong quarter, experiencing gains in both quarter-to-quarter and year-over-year figures. The borough saw 79 buildings trade in 52 transactions totaling $420.86 million in gross consideration, which equates to a 73 percent increase in dollar volume; a 30 percent increase in building volume; and a 24 percent increase in transaction volume compared to 2Q14.

Two large multifamily transactions pushed Queens dollar volume up on a quarter-to-quarter and year-over-year basis. The borough’s largest transaction took place in southern Astoria, where a pair of elevatored buildings located at 11-15 Broadway and 30-50 21st Street sold for $72 million, which is 20 percent above the price paid for the same assets in 2013.

All these factors are helping New York City return to the point where we were in 2007 in terms of investor confidence. That confidence coupled with a looming hike in interest rates will almost definitely have a positive impact on the multifamily market. So far, halfway through the year, the market has showed no signs of slowing down and that is a testament to the strong fundamentals within the market.

— By Shimon Shkury, President, Ariel Property Advisors. This article originally appeared in the August/September 2015 issue of Northeast Real Estate Business.

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