During 1H17, New York City’s biggest borough saw 570 transactions consisting of 756 properties, totaling approximately $3.58 billion in gross consideration. Compared with 2H16, dollar volume and transaction volume dropped 11% and 8%, respectively, while property volume held steady. Year-over-year the drop was more significant, with transaction and property volume falling 20% and 16%, respectively, while dollar volume slid 7% compared to the same period in 2016.
“Make no bones about it, the investment sales market struggled in the first half of the year, particularly during the first quarter,” said Jonathan Berman, Director at Ariel Property Advisors. “Having said that, activity noticeably bounced back during the latter part of the second quarter, indicating the market may have bottomed.”
Downtown Brooklyn and Park Slope were some of the most active neighborhoods in the borough, accounting for nearly 42% of the borough’s dollar volume, driven by large-scale multifamily and development transactions.
From January through June, Brooklyn multifamily transaction volume receded by 12% versus 2H16, with 337 transactions registered. Dollar volume followed suit, slipping 17% to $1.56 billion during the same period. Compared to the averages of 2016, prices per square foot decreased by 8.5% to $344 per square foot, capitalization rates increased from 4.58% to 4.88%, and gross rent multiples decreased from 15.96 to 15.28.
Multifamily assets were weighed by a slew of factors in 1H17, including a softening residential rental market, a challenging tax environment, increases in interest rates, and rising operating expenses. However, the borough continues to attract new institutional buyers, including Clipper Equity which bought Brooklyn’s largest single property multifamily transaction of the year at 107 Columbia Heights, a 161-unit elevator, former Jehovah’s Witness building, for $87.5 million or $568 per square foot.
Development site dollar volume in 1H17 decreased 41% to $1.04 billion and transaction volume dropped 12% to 148 compared to 2H16. One of the most significant development transactions was the $68 million sale of 633 Fulton Street sold by Jem Realty to the Rabsky Group. The Downtown Brooklyn/Fort Greene property completes an assemblage for the buyer who can now build an approximately 770,000 square foot building on the site.
However, the outlook for the development market is encouraging. The passage of Affordable New York tax abatement legislation, formerly 421-a, in April triggered an uptick in demand for development sites in May and June.
“Affordable New York has breathed life back into the development market in the outer boroughs. In Brooklyn in particular, we have seen an uptick in demand for development sites despite concerns over absorption of units in the pipeline and tightening of the capital markets,” said Sean R. Kelly, a Senior Director who specializes in assets located in Downtown Brooklyn and Williamsburg. “Bidding activity has recently picked up on listings, indicating second half activity should be markedly better than earlier in the year.”
Office properties, meanwhile, were a bright spot as they saw the largest increase in dollar volume out of all the asset classes in 1H17. Over $584 million of office properties traded in 1H17, exponentially higher than the nearly $71 million of office that was sold in 2H16. The jump in dollar volume can predominantly be attributed to Invesco’s exit from their stake in the Dumbo Heights office complex for more than $500 million. Another notable office transaction was the sale of 185 Marcy Avenue, a 70,000 square foot building, which sold for $30 million or $526 per square foot.
To view the full report, please click here: http://arielpa.com/report/report-APA-Brooklyn-mid2017-Sales-Report
