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Multifamily market makes a comeback

Manhattan’s multifamily property brokers have started the new year in an upbeat mood as the latest market reports point to a recovery in the sector.

A report from Compass puts 4Q 2018 transaction volume up by 35 percent compared to the third quarter and, although dollar volume dropped by 32 percent to $818 million compared to $1.2 billion in the third quarter, the numbers bode well for the future.

“It’s early days, but the numbers seem to indicate pricing may have reached its floor as the number of closed sales indicates an uptick in investor interest following several quarters of inflated pricing,” said Adelaide Polsinelli, vice chairman of Compass Investment Sales Division.

“This bodes well for the start of a new year as the market adjusts to new dynamics at both local and state levels which have left buyers jittery. A glut of new product and flattening rents have dogged the market through much of the last several quarters, but I believe we may look back on 2018 as the year the market corrected itself.”

Fifty-eight multifamily buildings comprising 1,702 units were sold in Manhattan in 42 transactions during 4Q 2018, according to the Compass report. During the third quarter, 50 buildings with 1,756 units traded in 31 deals.

Upper Manhattan dominated the market in terms of dollar volume driven by large sales such as A&E Real Estate Holdings’ $220 million purchase of the Glenn Gardens residential complex on the Upper West Side.

Other big deals included the $72 million Atlas Capital purchase of 601 West 110th Street in Morningside Heights, along with the sale of 1064 Madison Avenue, 160 East 89th Street and the Orbach Portfolio.

Downtown, it was Alphabet City that caught multifamily investors eyes during 4Q 2018 with $50 million in completed transactions closing at an average of $757 psf.

According to Polsinelli, “With four new developments coming to the area south of Alphabet City, investors smell big changes coming to a neighborhood that has been marked down in the past but is ripe with opportunity.”

Releasing his firm’s year-end Manhattan multifamily market report, Cignature Realty Associates CEO Lazer Sternhell, said, “The market’s getting better. Prices are increasing, volume is increasing and average prices are increasing. Does that me that we hit the bottom in 2017 and we are going to continue moving up? Possibly, but that’s what the numbers are telling us.”

However, he cautioned, “As a broker there are still a lot of question marks – interest rates are one thing people are concerned about and with the traditionally tenant-friendly Democrats now running Albany there is definitely some concern.

“I think we hit bottom in 2017. Now rates have come down and both buyers and sellers are more realistic and that translates into buyers being more aggressive, so I think this year we will continue to move forward.”

In his firm’s forecast for the multifamily sector this year, Shimon Shkury, president of Ariel Property Advisors predicted, “Limiting a landlord’s ability to increase rent should spur a strong uptick in demand for multifamily buildings that are overwhelmingly comprised of free-market units, with prices on these
types of assets likely to appreciate in tandem.

“Investors will be particularly interested in properties that benefit from “Affordable New York” or its earlier version, 421-a, especially if they maintain a 10-year investment horizon. The program offers developers of residential properties in certain areas a long-term tax break in exchange for the creation of low- to middle- income housing.”

Cignature Realtyʼs year-end Manhattan Multifamily Report revealed a large increase in the number of buildings sold in 2018, most in Northern Manhattan.

The report revealed that the total number of buildings sold in Manhattan in 2018 came to 403 – a 125.1 percent increase over 2017. Northern Manhattan with 197 buildings sold in 2018, accounted for the neighborhood with the most sales. Midtown ranked lowest with 39 buildings sold.

And the total dollar volume of those sales in 2018 represented $5.3 billion dollars – an 18.4 percent increase over year-end sales in 2017. The Upper West Side ranked highest in dollar volume at $1.67 billion in sales and Upper East Side, at the low end, with $635.2 million in sales.

“The building stock in Upper Manhattan is nicer,” said Sternhell. “The buildings are bigger, apartments larger and the prices are lower than the rest of Manhattan. But the area is gentrifying quickly and there is a lot going on up there.”

The Cignature report found that sale price averages per building for walk-ups decreased by 7.1 percent, as compared to year-end 2017. For elevator buildings, there was an 11.2 percent increase.

Total sale price averages per unit for walk-ups decreased by $514,878 or 19.8 percent as compared to 2017 and for elevator buildings, decreased by $601,903 or 3.4 percent. Total sale price averages per square foot for walk-ups fell by $725 or 16.7 percent and elevator buildings, fell by $621 or 5.6 percent.

Elsewhere in the Compass report, while the sale of office properties dominated the investment sector, the sale of Manhattan development sites hit $546 million for the 4Q 2018.

With Hudson Yards set to open this spring and following last summer’s Midtown east rezoning both Hell’s Kitchen and Midtown East saw brisk business.

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