The Market for Apartment Buildings by Borough
Two weeks ago, this column addressed the state of the New York City multifamily market, and most of the statistics discussed pertained to the entire city-wide market. I received many e-mails and a few calls asking for the data to be broken down on a submarket-by-submarket basis, so here it is.
It is particularly illustrative to look at the way the market has performed during the past nine quarters. From 2009 through the first quarter of 2011, the trends are very apparent.
It is clear, although no trends are without exception, that cap rates expanded in 2010 from 2009 levels as value hit its low point toward the end of last year. The 1Q11 results show that cap rate compression has returned to the multifamily marketplace and that an upward swing in value is occurring in nearly all submarkets.
Let’s see how each has performed.
The dollar volume of sales in the walk-up sector in the Manhattan submarket was nearly $90 million in 1Q11, putting the submarket on pace to be well ahead of the approximately $250 million totals in 2009 and 2010.
There were 22 buildings sold in the first quarter, containing 276 units total. Both of these numbers, if annualized, would be well ahead of the pace of the prior two years.
More important, we have seen cap rates and gross rent multiples stay approximately where they were in 2010, but the average price per unit has increased to well over $400,000 and the average price per square foot has risen to $592 from last year’s $525, a 13-percent increase. With caps and GRMs remaining relatively flat and price per square foot rising the way it did, it tells us that rent levels are rising.
Moving to the elevator sector, in 1Q11 the total dollar volume of sales was approximately $105 million, running at about half the pace of last year’s $832 million. In this submarket, there were only five buildings sold in 1Q11, containing a total of 230 units. Notably, the cap rate dropped from 2010’s 4.84 percent to 4.22 percent and the GRM average increased from 12.74 to 14.40.
The average price per unit increased from last year’s $419,000, to over $542,000. Additionally, the average price per square foot increased by 18 percent, from $438 last year to $518 in 1Q11.
In 1Q11, in the walk-up sector, there were only $11.2 million in total sales. This pace, if annualized, is about one-third of last year’s total of about $130 million. Also in the walk-up sector, there were eight buildings sold in 1Q11, with a total of 114 units.
The average capitalization rate dropped from an average of 7.48 percent in 2010, to 6.62 percent this year. The average price per unit increased from approximately $104,000 to over $110,000 and the average price per square foot also increased last year, by 20 percent, from $164 to $196.
In the elevator sector, there was only one property sold, at a price of $2.8 million. The property contained 31 units. It is difficult to ascribe statistical significance to this one transaction as, clearly, the pace is significantly below the $319 million of total activity last year in this sector.