Manhattan Apartment Building Sales Drop Like a Beer Bottle From the Fire Escape
Dana Rubinstein Aug. 20, 2009, 3:52 p.m.
The multi-family sector of the real estate market is often described as the healthiest of the commercial bunch.
Insomuch as there is, in fact, the occasional transaction, that description holds water. Especially when compared to the office-building market, which, as CB Richard Ellis recently reported, saw a measly three transactions of greater than $30 million in the first half of 2009.
But comparatively healthy is in no way synonymous with healthy, as a recent report by Marcus & Millichap’s Peter Von Der Ahe, a vice president for investment sales, makes abundantly clear.
Per usual, the report focuses on buildings with at least four apartments and that are valued at less than $100 million (though in this market, under $50 million is more accurate). Anyway, the overall finding: sales are down. Way down.
“It’s very low,” Mr. Von Der Ahe said. He attributes that, in part, to the demise of Lehman Brothers on Sept. 15, 2008. Most of the building transactions that would have closed in the first half of 2009 would have gone into contract in the second half of 2008. Lehman’s fall put the kibosh on much of that.
On the upside, despite the continued dearth of financing, Mr. Von Der Ahe expects multi-family sales to increase in the second half of 2009.
“The activity was so low the first half of the year, that even a slight increase is going to look like a lot more activity,” he noted. “One thing that you’re seeing, though, is that sellers in the marketplace have become a lot more realistic with pricing. … You’re also starting to see some strategic moves from owners looking to sell, and maybe they’re not going to get as much for a property as they would have a year or two ago, but they’re electing to sell, get the cash in their pockets now, to get prepared to take advantage of opportunities that they think will be coming up in the next year or two. It’s opportunistic. That’s positive.”
Here, by submarket, are Mr. Von Der Ahe’s findings (you might want to fortify yourself with a stiff drink first):
Only four multi-family buildings sold in midtown east in the first half of 2009, compared to seven sales in the second half of last year. Buyers paid an average of $420 per square foot, down from an average of $887 a square foot in the second half of 2008. The average price per unit came to $339,045, down from $1,025,269 in the second half of 2008.
Only three multi-family buildings have traded in midtown west in 2009, in contrast to six in the second half of ’08. They traded for an average price of $356 a square foot, down from $513 a square foot in the second half of ’08. Average price per unit: $253,568, down from $382,877 last year.
Upper East Side
Ten multi-families traded on the Upper East Side in the first half of this year, down only slightly from 11 in the second half of 2008. But the average price per square foot … my, oh my! Buyers paid $332 a square foot this year, compared to $627 in 2008. They paid an average of $217,951 per unit this year, down from $619,367 last year.
Upper West Side
There were six multi-family building sales this year, down from 18 during the second half of 2008. This may just be aberrations, but both the Upper West Side and Downtown (see below), saw prices increase, with the average price per square foot on the Upper West Side rising from $578 to $603, and the average price per unit rising from $429,642 to $585,856.
Downtown, the only area to see transaction volume grow, had 18 multi-family sales in the first half of ’09, up from 13 such sales in the second half of last year. This year, they traded at an average of $628 a square foot, up from $465 last year, and the units traded at an average of $762,039, up dramatically from $371,001 in the second half of 2008.
“But I wouldn’t necessarily say the market is moving up in those neighborhoods,” warned Mr. Von Der Ahe. “What we’ve seen across the market is that the better quality buildings and locations are holding their value, as opposed to the lesser quality buildings. When the market was really hot, you saw pricing become very compressed, and now that’s stretching out.”
Harlem saw eight multi-family transactions, down from 14 in the second half of last year. The buildings traded for an average price per square foot of $169, down from $251 last year. The units were valued at an average of $116,820, down from $154,220 last year.
Washington Heights and Inwood
These neighborhoods saw eight multi-family sales, down just slightly from nine during the second half of 2008. The price per square foot shrank from $167 to $127, and the average price per unit shrank from $118,354 to $95,240.