The Real Deal New York

Last year was a pretty terrible year for NYC’s multifamily market

Dollar volume, transaction volume and building volume were all down significantly
By Eddie Small | January 25, 2018 02:37PM

Jonathan Gray, Harvard’s Robert Ettl, Douglas Eisenberg, 344-346 Fort Washington Avenue and 34-15 Parsons Boulevard

The multifamily market in New York City had one of its worst years in recent history in 2017, according to an Ariel Property Advisors report.

Dollar volume, transaction volume and building volume were all down significantly compared to 2016, hitting levels that had not been seen since the start of the decade, the report says. Dollar volume was at $7.22 billion, the lowest in six years and a 48 percent drop from 2016, and there were just 457 transactions, the fewest since 2010 and a 28 percent drop from 2016. Building volume was down sharply as well at 781, a 29 percent drop compared to 2016.

Ariel Property Advisors attributed this largely to a dearth of institutional-level transactions, as there were only six sales throughout the city for $100 million or more, compared to 28 in 2016. The biggest deal of the year was Harvard Management Company’s roughly $244 million sale of its stake in a multifamily portfolio to Blackstone Group, which was significantly smaller than the top sale for 2016 — Blackstone’s $620 million purchase of Kips Bay Court — and 2015 — Blackstone and Ivanhoe Cambridge’s $5.3 billion purchase of Stuyvesant Town-Peter Cooper Village.

The rental market struggled last year as well, with median rents falling in Manhattan and Queens and staying flat in Brooklyn, the report says. Additionally, 26 percent of new Manhattan leases included concessions, and while the vacancy rate was at 1.9 percent at the beginning of 2017, it reached 2.09 percent by December.

Manhattan had a particularly rough 2017, with dollar volume at just $2.32 billion, the lowest it had been since 2010. This also represented a 57 percent drop from 2016, which was the sharpest decline throughout the city’s submarkets. The borough’s largest deal was the Starrett Corporation’s roughly $110 million sale of 361-363 West 50th Street.

Dollar volume also fell in northern Manhattan, which Ariel defines as being north of East 96th and West 110th streets. It dropped 47 percent to $1.36 billion, although price per square foot and price per unit rose by 7 percent and 4 percent, respectively.

The outlook was bleak in Brooklyn as well. The borough saw a 48 percent drop in dollar volume, to $1.48 billion, a 35 percent drop in transaction volume to 119, and a 21 percent drop in building volume to 227. Brooklyn Heights was the most popular neighborhood by dollar volume with $193 million of sales, but the biggest transaction of the year took place in Sunset Park, with Fairstead Capital’s roughly $100 million purchase of a 32-building portfolio of Section 8 housing.

And Queens wasn’t much better, with its overall dollar volume of $849 million making it the only submarket with less than $1 billion in sales for the year. It also had the sharpest decline in transaction volume throughout all submarkets, as it fell 40 percent to just 43 deals. Queens did see a pricing increase, however, with 4 percent growth overall and a 10 percent increase in price per square foot.

Volume did not drop quite as sharply as in the Bronx, which saw 102 transactions across 170 buildings worth a total of $1.21 billion. Values of multifamily properties in the borough increased by 8 percent, which was the strongest throughout the city’s submarkets.

Shimon Shkury, president and founder of Ariel Property Advisors, said in a statement that 2017 was a difficult year, but he does think the market will improve in 2018 and more so in 2019.

“Uncertainty that weighed on the market a year ago has largely dissipated,” he said, “and all signs indicate there will be more demand from institutional and international investors in 2018, particularly in the outer boroughs.”