New York City — Driven by a resurgence of development site transactions and the sale of several large multifamily portfolios, the dollar volume of investment property sales in Northern Manhattan jumped 44 percent in the first half of 2013 compared to the first half of 2012, while the number of properties sold rose 17 percent during the same period, according to Ariel Property Advisors' Northern Manhattan 2013 Mid-Year Sales Report.
During the first half of 2013, Northern Manhattan saw 151 transactions consisting of 200 properties totaling approximately $696 million in gross consideration, compared to the first half of 2012, which saw 139 transactions comprised of 171 buildings totaling $483 million in gross consideration.
Robust fourth quarter 2012 activity in anticipation of the expiration of the Bush tax cuts was the main contributor to declines in most metrics for the first six months of 2013 compared to the last six months of 2012, which saw 179 transactions with 251 properties with a dollar volume of $744.6 million.
“The biggest news from the first half of 2013 was the strength of the recovery in development sites in Northern Manhattan,” said Michael A. Tortorici, vice president of Ariel Property Advisors.
The first half saw 26 development site transactions totaling a gross consideration in excess of $69 million. This represents a 54 percent increase in transaction volume and translates to about 500,000 square feet of potential new construction in the next few years. The first half’s average price per buildable foot came in at $107, the first time since 2008 for the market to see a price per buildable above $100 in Northern Manhattan.
“Financing is readily available to qualified builders and developers are competing for a dwindling number of potential sites in Northern Manhattan, many of which were developed during the last real estate cycle,” Mr. Tortorici said. “We believe several major development initiatives along 125th Street, in East Harlem and West Harlem will continue to drive such values even higher in the foreseeable future. Such projects, which were only on the drawing board several years ago, are quickly becoming a reality.”
Victor Sozio, vice president of Ariel Property Advisors, also noted that multifamily sales gained strength during first half of 2013, and rents in many parts of Northern Manhattan surpassed 2007 peaks.
“The sharp rise in interest rates witnessed at the end of the second quarter has led to deals being done with greater urgency,” Mr. Sozio said. “With rates currently expected to remain stable until the end of the year, we anticipate increased sales volume in the second half. We are already aware of several transactions that are pushing the envelope on pricing.”
The following are highlights from the report:
· Multifamily. Multifamily prices continued to show rapid appreciation during the first half of 2013. Average capitalization rates have fallen below levels seen during the previous cycle, hitting 5.25 percent this half. This represents a significant drop from 2012 figures and largely reflects the even greater amounts of upside present in rent regulated buildings as market rents have surpassed previous highs. The average gross rent multiple hit 10.41, the price per square foot climbed to $228, and the average price per unit climbed to $191,495. From Inwood to East Harlem, such growth was consistent throughout Upper Manhattan.
· Development Sites. The uptick in development site sales shows that builders are more eager than ever to develop in Northern Manhattan. The first half average price per buildable square foot of $107 reflects this growing demand and it is expected that figure will climb higher through the end of the year. The average price per square foot for vacant buildings also increased to $241 from 2012’s figure of $191. This reflects both the strong rental market and the increasing price being paid by end-users for Upper Manhattan townhouses. In addition, Vornado has agreed to sell 1800 Park Avenue, the long stalled corner of 125th Street and Park Avenue for $65 million which should bring important momentum to development in East Harlem when combined with several other projects in the site’s immediate vicinity.
· User Properties. Following a trend seen throughout Manhattan and Brooklyn, high-end user properties in Northern Manhattan are rapidly appreciating. While the 45 transactions that took place is comparable to the number of transactions seen in the first half and second half of 2012, the values are significantly higher. The average price per square foot seen in the first half of 2013 came in at $422, nearly $100 higher than the figure recorded at the end of 2012 and a level that surpasses the previous 2007 high of $395. Not only is it becoming commonplace for sales to occur above $350 per square foot, but a growing number of fully renovated, well located buildings sell for more than $500 or even $600 per square foot, the report noted.
The Northern Manhattan 2013 Mid-Year Sales Report tracks property sales $500,000 and above and buildings of all sizes.
Ariel Property Advisors is a New York City investment property sales firm with an expertise in the multifamily market. The firm also produces a number of research reports including the Multifamily Month in Review: New York City; Multifamily Quarter in Review: New York City; Multifamily Year in Review: New York City; Brooklyn Mid-Year and Year-End Sales Reports; Northern Manhattan Mid-Year and Year-End Sales Reports; and the Bronx Mid-Year and Year-End Sales Reports.