NEW YORK, NY – March 15, 2018 – The New York City multifamily market fared well on an annual basis in January, with most volume metrics holding steady. However, a concerted effort to swiftly close out transactions at the end of last year skewed activity, causing volume to decline on a month-over-month basis.
Investor enthusiasm for the asset class gained considerable steam during the fourth quarter. As the end of 2017 neared, sales slated for the year’s pipeline were pushed to be closed, causing dollar volume to rise above $1 billion in December. Unsurprisingly, this momentum petered out in January, and dollar volume slumped. Nevertheless, January’s slowdown was likely transitory as February witnessed a palpable pickup in momentum.
In January, New York City saw 43 multifamily transactions comprised of 68 buildings totaling $898.06 million in gross consideration. On a month-over-month basis, transaction, building, and dollar volume fell 9%, 21%, and 14%, respectively. On a year-over-year basis, transaction volume fell 4%, while building and dollar volume rose 5% and 91%, respectively. The dramatic rise in dollar volume year-over-year can be attributed to a $300 million-plus transaction in Manhattan.
Indeed, Manhattan shined bright in January, notching the highest dollar volume of all sub-markets in New York City. Brooklyn, meanwhile, was the only area to experience across-the-board gains on a month-over-month basis. Queens, however, was the least transactional, while The Bronx saw the lowest dollar volume of any sub-market, and Northern Manhattan saw broad-based declines.
According to trailing 6-month averages ending in January, The Bronx continued to experience cap rate compression and gradual increases in gross rent multiples (GRM). Compared to the same period a year earlier, Northern Manhattan saw price per square foot rise 2.22% to $369, while Brooklyn gained 2.88% to $393. Also noteworthy were cap rates in Manhattan, which decreased by 4.46% to 3.64%
From a macroeconomic perspective, data this past week showed inflation cooled slightly in February. While that should keep the Federal Reserve on track to raise short-term interest rates at its policy-setting meeting next week, alleviating concerns that policymakers would raise rates more aggressively. Solid job creation, a 4.1% unemployment rate, and robust readings on consumer sentiment suggest the economy is on firm footing.
Manhattan outperformed all sub-markets in terms of dollar volume, registering a 39% rise to approximately $514.93 million. This lofty level can largely be attributed to the sale of 980-996 Avenue of the America, a 339-unit Garment District elevatored building that was purchased by Vanbarton Group for $316 million. The purchase price translates into $790 per square foot and $932,153 on a per unit basis.
Compared to December, transaction volume was unchanged at 13 sales, while building volume slid 18% to 14 properties. Across the sub-market’s 13 transactions, only 1 was a portfolio transaction, down from 4 the prior month.
Northern Manhattan opened the year on soft footing with the sub-market experiencing the most significant across-the-board declines in January. Transaction, building, and dollar volume decreased 40%, 76%, and 68%, respectively. The 6 transactions in the sub-market saw the sale of 8 properties for a total consideration of $144.50 million.
The steep monthly decreases in dollar and building volume can be attributed to the December sale of Harvard Management Company’s stake in a 13-building A&E portfolio to Blackstone Group for $243.65 million. In fact, on a year-over-year basis, January’s transaction and building volume were unchanged, while dollar volume surged by 134%.
The Bronx experienced a tepid January. While there was a 23% increase in building volume, dollar and transaction volume fell by 33% and 22%, respectively. The borough saw 7 transactions in which 16 properties traded for a gross consideration of $49.29 million.
The largest transaction in the borough was the sale of a 6-building PRB Realty Corp. portfolio for $14.14 million. The largest single property transaction in The Bronx was the sale of 1417 Longfellow Avenue. The building, which was brokered by Ariel Property Advisors, sold for $9.88 million.
Brooklyn, meanwhile, enjoyed a strong month. On a month-over-month basis, transaction, building and dollar volume increased 44%, 50%, and 32%, respectively. On a year-over-year basis, the borough also notched increases in all three metrics.
Notable sales in January include the $46 million sale of a portfolio of 3 properties comprised of 2301-2312 85th Street, 320 Ocean Parkway, and 420 Avenue F.
Queens experienced a lackluster January. The borough registered 4 transactions comprised of 8 buildings with a gross consideration of $69.35 million. Building and transaction volume fell by 33% and 47% respectively, but dollar volume increased 11%. Of the 4 transactions, 75% were in excess of $20 million.
The borough’s largest sale was 34-04 34th Avenue, 30-44 32nd Street, and 31-36 32nd Street in Astoria, which Steelpoint Property Group purchased for $22.65 million.
To view the full report, please click here: http://arielpa.com/report/report-MFMIR-Jan-2018
Ariel Property Advisors is a commercial real estate services and advisory company located in New York City. The company covers all major commercial asset types throughout the NY metropolitan area, while maintaining a very sharp focus on multifamily, mixed-use and development properties. Ariel’s Research Division produces a variety of market reports that are referenced throughout the industry.
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