The Real Deal New York

Queens investment sales slumped in the first half of 2017

Transaction, property and dollar volume have all been down so far this year
By Eddie Small | July 24, 2017 04:30PM

Clockwise from left: 21-81 38th Street, 21-80 38th Street and 23-05, 23-15 30th Avenue (Credit: Google Maps)

Queens investment sales got off to a very sluggish start in 2017 due to factors ranging from 421a to interest rates to the Trump administration, according to a new report.

During the first six months of 2017, the borough saw 262 transactions worth approximately $1.65 billion across 366 properties, Ariel Property Advisors reported. Compared to the second half of 2016, the number of transactions dropped by 12 percent, the number of properties dropped by 11 percent and the dollar volume dropped by 33 percent.

These decreases were even starker compared to the first half of 2016, when transaction volume dropped by 25 percent, property volume dropped by 23 percent and dollar volume dropped by 27 percent.

A variety of issues made investors wary during the first six months of the year, including increasing interest rates and rent regulation revisions, according to Ariel. They are also concerned about whether the Queens market will be able to handle the massive amount of new residential units on their way to the borough.

Multifamily properties made up about half of the sales volume in Queens during the first half of 2017, consisting of 184 properties and 125 transactions worth roughly $600 million. These numbers were all down from the second half of 2016 by 16, 5 and 24 percent, respectively.

There were still several transactions worth more than $20 million in Queens during the beginning of the year in neighborhoods including Astoria, Flushing and Jackson Heights. Kushner Companies, for instance, sold a four-building package in Astoria this spring to Queens investor Karan Singh for $76.25 million, and the LeFrak Organization sold an 11-story office building at 95-25 Queens Boulevard in March for $140 million to health insurer Fidelis Care, one of its tenants.

The average price per square foot in Queens for multifamily properties increased to $377, up 9 percent from 2016’s average, while the per unit price increased by 1 percent to $287,000. Office properties fell to $166 million, a 68 percent drop compared to the second half of 2016, but this was much higher than the first half of 2016, when dollar volume was just $34 million.

Development site sales slumped as well, with dollar volume dropping by 29 percent, transaction volume dropping by 31 percent and property volume dropping by 41 percent compared to the second half of 2016. This was partially due to the expiration of 421a, which was reinstated in April. The largest development deal was 43-10 23rd Street in Long Island City, which Normandy Real Estate Partners purchased a stake in for $54 million in May. The company plans to reposition and expand the warehouse property into an office building.

Northwest Queens accounted for 60 percent of transactions and 70 percent of dollar volume in the first half of the year, and Ariel expects that this trend will continue “as Long Island City continues to mature as an office market, the L-train shutdown gets closer and the MTA continues to allocate funds to the number 7 train line.”

Ariel maintained that the overall outlook in Queens was still positive, as properties in the borough are still available at a discount compared to Manhattan and prime areas of Brooklyn.

“There was a lot to chew on in the first half, so many participants opted to stay sidelined,” Ariel Property Advisors investment sales director Daniel Wechsler said in a statement. “That waned a bit in recent months and when it comes down to it, investors are still willing to pay premiums for well-located assets with upside.”