The first half of 2017 was particularly slow as many investors exercised caution amidst general market uncertainty and interest rate volatility in the months following the U.S. presidential election. The second half of 2017 was considerably more active and while pricing remained mostly stable, other factors such as a more challenging rental market, conservative lending, and a continued disconnect between sellers and buyers continued to present challenges in negotiations.
During 2017, Northern Manhattan saw 254 transactions consisting of 314 properties, totaling approximately $1.94 billion in gross consideration. Compared with 2016, dollar and transaction volume dropped 46% and 14%, respectively, while property volume slid 29%, according to Ariel Property Advisors’ newly released “Northern Manhattan 2017 Year-End Sales Report.”
“The second half of 2017 was noticeably more active and while pricing held steady, other factors, such as a more challenging rental market, conservative lending, and a continued disconnect between sellers and buyers presented challenges in negotiations,” said Victor Sozio, Executive Vice President at Ariel Property Advisors.
Geographically, Washington Heights recorded the highest dollar volume in the area, capturing 25%, while Central Harlem dominated transaction volume, with a 36% market share. By asset class, multifamily assets ruled dollar and transaction volume in 2017, with a 76% and 47% market share, respectively.
Dollar volume for multifamily assets dropped 46% year-over-year to $1.47 billion, while transaction volume stumbled 21% to 120. The sizeable decline in volume can largely be attributed to fewer large-scale transactions that were much more prevalent in 2016.
Although there were two partial interest transactions at or above $95 million, the market was dominated by small to mid-size deals as every other trade was priced below $50 million. In comparison, six multifamily transactions of over $100 million occurred in 2016 and accounted for approximately 46% of that year’s multifamily dollar volume.
However, overall pricing on Northern Manhattan’s multifamily assets remained strong, with the average price per square foot climbing 5.8% to $382, and price per unit rising 2% to $320,729. Average cap rates rose marginally to 4.08% from 3.95% the previous year, and the gross rent multiplier (GRM) slipped to 15.24 from 15.87.
“It is important to note that 2017 metrics remain higher than levels seen in 2015 and we continue to see select transactions sell at above $500 per square foot,” said Matthew L. Gillis, a Director who specializes in multifamily properties and development sites located in the region.
Some notable 2017 multifamily sales include 558-560 West 184th Street for $12.3 million, or $633 per square foot and $514,583 per unit. Also noteworthy was the sale of 1356-58 Saint Nicholas Avenue for $7.8 million, or $526 per square foot and $487,500 per unit.
Meanwhile, development assets saw dollar volume fall 64% to $173.0 million and transaction volume slip 20% to 32. The average price per buildable square foot decreased to $209, an 8% drop, but relatively minor considering it has consistently risen since 2012.
The largest development site transaction of 2017 was 223-235 Saint Nicholas Avenue, a distressed site that sold for $48.6 million. Another notable trade that took place in East Harlem was 110 East 125th Street & 1801 Park Avenue, which traded for $18.15 million, or $194 per buildable square foot. The new East Harlem rezoning that passed in December has the potential to be a powerful catalyst for development site sales over the next few years.
“Investors remain bullish on East and Central Harlem as Columbia University’s Manhattanville campus expansion and the recently approved East Harlem rezoning plan are increasingly attracting new institutional and private capital to the area,” said Sozio.
Lastly, as was the case with other asset classes. the commercial market in Northern Manhattan experienced a soft year. Transaction volume was flat at 5 and property volume slid by 17% to 5. Total dollar volume slumped 61% to $42 million.
Looking ahead, with strong economic fundamentals, elevated investor confidence seen in recent contract signings and plentiful amounts of capital looking to invest in New York City real estate, we expect Northern Manhattan investment sales volume to grow modestly from lackluster 2017 levels. Investors appear to be approaching 2018 with a firmer grasp of the risks and rewards that today's market presents, which should translate to more deal flow.
To view the full report, please click here: http://arielpa.com/report/report-APA-N-Man-2017-Sales-Report
