While final 2015 investment property sales figures suggest Northern Manhattan had a lackluster year with year-over-year declines in dollar volume and the number of transactions sold, the underlying statistics suggest a much brighter story.

Northern Manhattan saw $2.53 billion in overall dollar volume in 2015, a 21% decline year-over-year. However, 2014 statistics included the large $1.04 billion sale of the Urban American East Harlem Portfolio, which propelled the overall dollar volume in 2014 to $3.22 billion. Without this major outlier, 2015’s dollar volume would have exceeded 2014’s total by an increase of 16%.

Lacking a major billion-dollar transaction like the above-mentioned portfolio and considering that transaction and property volumes both decreased 13% year-over-year, it raises the question: where did Northern Manhattan’s strong dollar volume in 2015 come from?

The answer: Northern Manhattan saw many institutional caliber transactions and sharply higher pricing.

Large Trades Increased in 2015

Northern Manhattan had 23 transactions with a sales price of $25 million or higher in 2015. For comparison, 2014 saw 15, 2013 had 14, and 2012 clocked in with a mere 4.

The largest sale to take place in Northern Manhattan was a 24-building, 586-unit portfolio for $148.5 million. Spanning from West 135th St. to West 173rd St., with most of the buildings situated between Broadway and Amsterdam, the portfolio secured $250,000 per unit.

Another property to trade hands in 2015 was Ariel Property Advisors’ sale of 680-684 Saint Nicholas Ave., a 117-unit multifamily property for $41 million, which had a sub 4% cap rate and units pricing at $350,427 each. This represented a 73% increase from its 2012 sale for $23.625 million.

Record-Breaking Pricing

According to Ariel Property Advisors’ recently released “Northern Manhattan 2015 Year-End Sales Report,” prices for all product types hit new highs. Multifamily metrics saw tremendous growth with the average price per square foot reaching $337 for a 24% increase year-over-year. The average gross rent multiple went from 12.82 in 2014 to 14.66 in 2015 and the average price per unit increased 15.5%, reaching $273,232. On the development side, the average price per buildable square foot rose an impressive 47%, year-over-year, hitting $199.

Several factors contributed to these gains. Investors are pricing in several economically stimulating projects in the pipeline across Northern Manhattan, including the Columbia University Expansion and the Whole Foods at Lenox and 125th St. Other factors include a lack of multifamily inventory, plentiful amounts of capital fueled by low interest rates, and international investors seeking the safety of New York real estate.

As we have seen citywide, sharp appreciation rates are leading many owners to sell Northern Manhattan assets after relatively short-term holding periods. Ariel Property Advisors’ research team was able to identify 76 properties that originally traded during the 2012 – 2014 timeframe and sold again in 2015. The price of the properties that were held for a maximum of three years increased 78% on average. The re-traded properties that accounted for $506 million volume in Northern Manhattan from 2012 – 2014 clocked in at $900 million just a few years later. This uptick has impacted smaller properties and portfolios, and has spanned across different product types.

A recent example of this rapid appreciation, is a property recently sold by Ariel Property Advisors at 1655 Madison Ave. in East Harlem. The 50’ wide development site originally sold in 2013 for $2.2 million, which translates to $170 per buildable s/f. When the property recently sold, our sales team was able to secure a $7 million sale price, a 218% jump, translating to $391 per buildable s/f – an area record.

On the multifamily front, as previously mentioned, 2015 witnessed the sale of a 24-property portfolio for $148.5 million, which is a 98% increase from the last time it traded in 2013.

Another recent example is Ariel Property Advisors’ $11.595 million sale of 567-569 West 125th St., a 24-unit multifamily property. The six-story, 21,768 s/f property previously sold in 2012 for $5 million, representing a 132% surge in sales price in just three years. The site’s value has benefitted tremendously due to the Columbia expansion, which is located right around the corner.

As we enter a new year, strong demand for multifamily housing should continue, as inventory and interest rates remain low, and the amount of available capital remains constant. While one might not expect the sharp pricing increases witnessed in the last several years, current activity and signs indicate that pricing for multifamily assets will remain stable for at least the first half of the year.

With concerns emerging in the luxury condominium market, financing terms for developers becoming more conservative, and the ambiguous future of 421-A tax benefits, developers are increasingly more tentative with development site pricing. Northern Manhattan’s anticipated trajectory of continued growth can mitigate some of an industry wide adjustment in pricing, but early signs show that an increase in development site pricing might not be in store for 2016.