NYC Multifamily Q1 Dollar Volume Hits Lowest In 4 Years

The New York City multifamily market continued to cool off in Q1 as uncertainty from the previous year’s election suppressed the number of properties traded. Dollar volume dropped to its lowest in four years as large, institutional-level transactions all but vanished. Q1 dollar volume dropped 60% year-over-year to $1.6B in gross consideration.

Pricing in the first quarter was mixed. Properties in The Bronx commanded the highest price/SF relative to past quarters, while those in Manhattan and Brooklyn received lower rates when benchmarked against recent data.

This first quarter, no transaction exceeded $100M, paling in comparison to the 11 registered in Q4 2016; moreover, only 16 sales were above $20M in this period vs. 29 in the previous quarter.

New York City saw 117 transactions composed of 176 buildings in the first quarter, representing annual declines of 35% and 39% from Q1 2016. Remarkably, transaction volume was almost unchanged from Q 2016, which saw 118 deals.

“Hesitation around the election last year had many investors hitting the pause button, which ultimately impacted first-quarter volume,” Ariel Property Advisors president and founder Shimon Shkury said. “Now that the uncertainty has subsided, and 10-year yields have come down, we expect to see a sharp pickup in activity.”

From a macroeconomic perspective, a robust labor market and firming inflation had the Fed, following years of lackluster growth, confident that the higher rates would not depress investment. The Fed’s policymaking arm raised short-term interest rates in March, its second increase in three months yet only its third since the recession.

Ariel Property Advisors gave us this first quarter’s noteworthy multifamily transactions and figures parsed by submarket.

Manhattan 

Manhattan had a tepid first quarter this year, with just 32 buildings comprising its 27 transactions totaling $512.6M. This represents declines of 29%, 16% and 69%, respectively, compared to Q1 2016. Based on six-month trailing averages, Manhattan cap rates rose for a third straight quarter, hitting 3.87%.

In Kips Bay, A.D. Real Estate Investors bought a 67-unit elevator building at 312 East 30th St. for $52M. The Blackstone Group and Fairstead Capital sold it at $1,087/SF and $776K/unit.

Northern Manhattan 

Northern Manhattan, one of the most active areas in 2016, saw the most significant decline of any submarket at the start of 2017, with all volume metrics continuing to fall. Northern Manhattan had just $194.8M from 13 trades, down 66% and 52%, respectively, from Q1 2016.

A five-building portfolio in Central Harlem at 265-273 West 146th St. was the submarket’s only transaction to surpass $20M in Q1. The 100-unit, mixed-use walk-up buildings sold for $23M, or $484/SF, with a reported cap rate of 4.54%.

Brooklyn 

Brooklyn had 32 sales spanning 53 buildings totaling $397.6M. These numbers represent an improvement from the previous quarter, but a year-over-year decrease of 35% in transaction volume and a 52% decline in dollar volume.

A 103-unit, 11-story elevator building at 485 Kent Ave. in South Williamsburg sold for $55.7M, representing $370/SF and $541K/unit.

The Bronx

The Bronx fared modestly well in Q1, with 33 transactions totaling $275M. These figures represent a 27% increase in transactions and a 47% jump in dollar volume over the fourth quarter of 2016, despite year-over-year declines of 33% and 52%, respectively.

In Mount Hope, a 222-unit elevator building at 1511 Sheridan Ave. sold for $38M, or $188/SF, with a reported cap rate of 3.77%.

Queens

Queens had just 12 transactions consisting of 17 buildings totaling $220M. These numbers are in stark contrast to Q1 2016, which saw 23 trades involving 30 buildings that amounted to $411.6M.

In Flushing, Pinnacle Group purchased two elevator buildings from Treetop Development. The properties at 132-40 and 133-21 Sanford Ave. sold for $57.6M or $366/SF.

To read the full NYC Multifamily Q1 research report, click here.