Upper West Side’s stability lures investors
Investors are betting on the Upper West Side, despite its low capitalization rates and lack of cachet as a trendy neighborhood, the Wall Street Journal reported.
Commercial real estate activity in the area is outpacing that seen in the East Village, Chelsea and Williamsburg, according to an Eastern Consolidated report seen by the Journal. In 2012, multifamily sales on the Upper West Side averaged 7.1 percent of the total sales volume in Manhattan, a sizeable jump from 2011’s figure of 2.6 percent. Bar and restaurant owners are also flocking to the area to be part of its growing restaurant resurgence.
Investor interest in the area tapered off in 2006 after other areas such as Chelsea and the West Village attracted eyeballs, and wallets, Eastern Consolidated chief economist Barbara Denham told the Journal. But now investors were flocking back, having seen the long-term benefits of putting money into the neighborhood, she said.
“It doesn’t have the trendiness of Chelsea, or the night life, but it has families, and long-term residents,” Denham said. “Despite low cap rates, investors know it’s a good deal.”
Massey Knakal broker Hall Oster told the Journal that he closed 12 deals on the Upper West Side in 2012, the largest volume since the financial downturn. Cap rates for elevator buildings in the area are between 2 percent and 3.5 percent, while walk-up buildings range between 3.5 percent and 4.5 percent, Oster said. But buyers were looking past that, he added.
“We had properties that traded at almost nil cap rates based on very low rents,” Oster said. “But [buyers] see the future investment potential, they’re not looking at it based on today’s rent roll.” [WSJ] –Hiten Samtani