NYC Multifamily Market Rebounds In Q3, Looks To End Year Strong

The New York City multifamily market rebounded in the third quarter, after a weak Q2. Ariel Property Advisors, a New York City investment real estate services and advisory company, tracks each month’s data closely, parsing the numbers by submarket and analyzing the prevailing market forces. Ariel founder and President Shimon Shkury shared some Q3 insights and his predictions for the asset class.

Bisnow: How did the multifamily market perform in the third quarter?

Shkury: The market picked up considerable steam in the third quarter, with dollar and transaction volume reaching 2017 highs as investors became more enthusiastic about the asset class. After a tepid start to the year, positive momentum that commenced during the latter part of Q2 accelerated in Q3, with the market topping $2B in sales for the first time since Q4 of 2016. Dollar volume was decisively driven by Manhattan, which saw two sales above $100M. During the first and second quarter, New York City registered only one sale at that level across all submarkets. Another notable Q3 development was transaction volume, which jumped to its highest level since the same quarter in 2016. From July through September, New York City saw 122 multifamily transactions comprised of 188 buildings totaling $2.22B in gross consideration.

Bisnow: How are multifamily prices holding up?

Shkury: Pricing appreciated year-over-year in The Bronx and Queens, while other submarkets saw mixed results. The Bronx saw the most sizable appreciation, with the average price per square foot leaping 10%, reaching $200 for the first time on record. 

Bisnow: How did each submarket perform in the third quarter?

Shkury: On a submarket level, Manhattan was a standout in Q3, and Northern Manhattan also enjoyed a banner quarter. The Bronx saw mixed activity, while Brooklyn saw a jump in transaction volume. Queens, on the other hand, had a noticeably weak quarter. Manhattan registered its strongest quarter of the year, recording nearly as much dollar volume as the rest of the market combined. Northern Manhattan notched across-the-board gains. Five sales above $20M pushed dollar volume to nearly $365M, the highest total in Northern Manhattan since Q4 2016. The Bronx in Q3 experienced gains in transaction and building volume, but declines in dollar volume. Brooklyn’s 36 transactions were the most for the borough in a quarter since Q3 of 2016, resulting in a 29% increase against last quarter. Queens activity was extremely lackluster in Q3, with the borough experiencing steep declines across the board. 

Bisnow: What were the most active neighborhoods? 

Shkury: On a neighborhood level, Washington Heights was far and away the most active area in Northern Manhattan during the third quarter, with the neighborhood registering nine transactions that sold for $160M. In Manhattan, the Garment Center led the way with $320M in sales in the quarter. Meanwhile, Brooklyn Heights notched the highest dollar volume in Brooklyn during the third quarter, with $63.5M. Flatbush also fared well, with $45M in sales across four transactions. In The Bronx, Kingsbridge Heights saw the most dollar in the quarter with $52.2M, while Jamaica led dollar volume in Queens, registering $20M.

Bisnow: What do you see on the horizon for the multifamily market next year?

Shkury: The third quarter’s acceleration in bidding activity on active listings and contract signings indicates the market has turned around after a sluggish start to the year. While interest rates are on the rise, they remain historically low, which bodes well for real estate financing throughout New York City. Pricing will be a mixed bag, but some locations will continue to increase in value, while others will plateau. Multifamily assets in submarkets will likely outperform Manhattan. However, we do not expect a big drop-off in pricing anywhere in New York City. So, while we are optimistic that the pickup in activity in recent months will carry into 2018, our baseline expectation is for multifamily volume and pricing to remain stable at current levels over the next year. 

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