Northern Manhattan’s West Harlem lies at the epicenter of a surge in investor demand for commercial real estate, a trend that will likely continue for years to come. Asset values in the up-and-coming neighborhood are poised to appreciate further as Columbia University’s massive Manhattanville campus expansion, along with the revitalization of the Factory District, usher in a sharp uptick in economic and population growth.

(From left to right) Orry Michael, Director - Investment Sales and Connor Lyman, Analyst - Investment Research

Columbia University, New York State’s oldest university, is dramatically altering the landscape of West Harlem as we know it today. Through a lengthy approval process by the City’s Planning Commission, the university received the green light in 2007 to move forward with their largest development project since its Morningside Heights campus was formed in 1897.

Columbia’s ambitious endeavor is expected to cost around $6.3 billion by its estimated completion date in 2020. The Manhattanville campus, masterfully designed by world-renowned architect Renzo Piano, will encompass 17 acres from West 125th Street to West 133rd Street between Broadway and 12th Avenue.

The campus’ cornerstone – the 450,000 square foot Jerome L. Greene Science Center and the 60,000 square foot Lenfest Center for the Arts – opened its doors to the public this past year. The next phase of the project is underway and involves the development of two buildings spanning 490,000 square feet for Columbia’s business school, the Henry R. Kravis building and the Perelman Center for Business Innovation. An additional 56,000 square feet will be utilized for the development of the University Forum, which is located right on the corner of Broadway and 125th Street.

According to Recity analytics, about 160,000 square feet are expected to come online in Manhattanville across all product types by the end of 2018. Through 2022, 2.2 million square feet across 270 residential units, 68,000 square feet of retail, and 500,000 square feet of office space are anticipated to hit the market.

The appeal of West Harlem and Hamilton Heights cannot be overstated. Despite the deluge of demand, multifamily properties in the area remain relatively more attractive than other Northern Manhattan neighborhoods. For example, since 2017 the combined average price per square foot for multifamily properties in West Harlem and Hamilton Heights is a modest $385 per square foot. This pricing is approximately 20% below multifamily property valuations in Central Harlem, which average around $487 per square foot according to Ariel Property Advisors’ Investment Research Division.

Indeed, properties in the vicinity have been fetching low cap rates and lofty prices. For example, 351-57 West 125th Street, a mixed-use property marketed by Ariel Property Advisors, sold for $23 million in 2017, or $500 per square foot, which is a testament to the strengthening values in the area.

West Harlem real estate offers considerable upside as the neighborhood is on the cusp of major economic growth. According to Columbia University, the new Manhattanville campus expects to directly employ an estimated 2,500 people over the next 10 years, including faculty. Meanwhile, more than 1,500 construction-related jobs a year have been created since breaking ground on the development. To improve and foster its relationship with the community after the Manhattanville expansion, the university agreed to invest $150 million to benefit the local community surrounding the new campus.

Moreover, approximately 1,270 business students will likely take up residence close to the new buildings in Manhattanville. This should have a positive influence on rent growth and buoy local expenditures, ultimately bolstering the local economy. The addition of significant office space to the area will compound this benefit as median income among young professionals is well above the local average.

Factoring in the Factory District

The Manhattanville Factory District is a unique Northern Manhattan region which encompasses three acres of historic industrial buildings. The district spans from West 125th to West 128th Street between Amsterdam and Convent Avenue, complementing Columbia’s new campus located just a few blocks to the west. The factory district, whose industrial economic base languished after the Great Depression, is currently experiencing an extraordinary rebirth. The revitalization of the area is being fueled by a combination of new housing supply as well as an influx of recreational venues, restaurants, and shopping attractions including Fairway Market and Dinosaur BBQ.

Smart money investors are actively acquiring in West Harlem on the periphery of Columbia University’s Manhattanville campus following the expectation that the university would bring prosperity to the area. Savanna Fund’s $96 million conversion of the Jewish Theological Seminary located at 525 West 122nd Street is one example. The project will contain 170 condo units and span approximately 450,000 square feet. Additionally, Janus Property Company is undergoing a one million square foot redevelopment of the Factory District into a state of the art business and community district.

Looking forward, Columbia’s capital investment into Manhattanville and the redevelopment of the Factory District are undeniably game-changers, with the transformations currently underway both monumental and historic in proportion. Whether it be attractive pricing, or the considerable upside posed by economic and population growth, West Harlem will remain one of the most sought-after markets by investors in New York City.