Death march for NYC’s multifamily market continues

City saw just 88 buildings sold for about $1B during third quarter

Oct.October 29, 2019 07:00 AM
221 East 71st Street and 60 East 12th Street (Credit: Google Maps and iStock)

221 East 71st Street and 60 East 12th Street (Credit: Google Maps and iStock)

Hammered by state lawmakers in June, New York’s multifamily market is showing few signs of life.

Dollar volume, deal volume and building volume all dropped by double digits on both a quarterly and year-over-year basis after Albany passed a strict rent law, according to a new report from Ariel Property Advisors.

The city saw just 61 multifamily transactions across 88 buildings for $1.1 billion during the third quarter, representing drops of 45 percent, 57 percent and 51 percent, respectively, from the same period last year. Transaction and building volume each dropped by 42 percent from the second quarter of 2019, while dollar volume dropped by 38 percent.

Immediately after the legislative session began in January it became clear that a more pro-tenant rent-stabilization law was likely to replace the one due to expire June 15, putting the value of multifamily buildings in doubt. Sales slowed to a crawl.

The multifamily market experienced its slowest first half of the year since 2011, and the year-over-year drops in transaction, building and dollar volume were even starker in the third quarter. (Transaction volume fell by 31 percent during the first half of the year compared to the first half of 2018, while building volume fell by 44 percent, and dollar volume fell by 36 percent.)

There were only two deals throughout the entire third quarter for more than $75 million, a major reason for the decline in dollar volume. The Dermot Company bought 221 East 71st Street from Spitzer Enterprises for $159.5 million, and Slate Property Group purchased 60 East 12th Street from Heller Realty for $107.5 million.

Manhattan saw the highest dollar volume during the third quarter with $657.8 million worth of sales. Brooklyn came in second at $258.2 million, followed by the Bronx at $128.5 million. Queens and Northern Manhattan were far behind with $30.4 million and $25.5 million worth of sales, respectively.

These numbers represented declines of 47 percent year-over-year in Manhattan, 49 percent in Brooklyn, 61 percent in the Bronx, 53 percent in Queens and 77 percent in Northern Manhattan.

Brooklyn saw the most deals during the third quarter at 22, followed by Manhattan at 19 and the Bronx at 16. Just two deals apiece closed in Queens and Northern Manhattan. These were respective declines of 33, 30, 45, 80 and 83 percent.

Numbers for building volume painted the same grim picture. The Bronx led the way with 32 buildings sold (down 46 percent), followed by Brooklyn with 27 (down 64 percent), Manhattan with 21 (down 49 percent), Northern Manhattan with five (down 71 percent) and Queens with three (down 75 percent).

Building owners and potential buyers seem to be pausing to assess the new value of rent-regulated buildings under the new law. But Shimon Shkury, the president and founder of Ariel Property Advisors, predicted in a statement that the market would pick up.

He cited one relatively pricey deal that closed early in the fourth quarter: a $75.5 million sale of a two-building, 214-unit affordable housing portfolio called Harlen Housing in Central Harlem, which Fairstead Affordable purchased Oct. 11.

“We anticipate higher transaction volume in the fourth quarter based on more multifamily closings, in addition to transactions in contract that are expected to close before the end of the year,” Shkury said.

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