Outer Borough Sales Activity Booming
Jotham Sederstrom Oct. 31, 2012, 7 a.m.
Last week, I recapped the activity in the city’s investment sales market through the first three quarters of the year. The numbers looked impressive, as the dollar volume was $21.75 billion, which, on an annualized basis, comes to about $29 billion this year. If this occurs, we’ll see a 6 percent increase over the $27.4 billion observed in 2011.
We’re anticipating a very busy fourth quarter, which should lead to an annual total between $30 and $32 billion. This total will be about 5 times the $6.1 billion seen in 2009 but will still be only about half of the $62 billion at the peak of the market in 2007.
With regard to the number of properties sold, which is a better indication of market activity, given how impactful a few very large sales can have on dollar volume, there were 2,336 properties transferred in the first three quarters of 2012, already more than the 2,222 that traded all last year. We’re on pace for 3,115 sales this year, which would be a whopping 40 percent increase over 2011 levels.
Notably, in the third quarter, there were 948 properties sold, the highest quarterly total since the first quarter of 2008. We expect more than 1,000 properties to sell in the fourth quarter, which would get us back to peak levels seen in the period between 2005 and 2007, during which 11 of 12 quarters saw more than 1,000 properties sold.
There are several reasons why activity has been so healthy this year, among them the looming threat of capital gains increases, which has brought many properties to market ahead of when they might have without this externality. Another reason is that activity in the outer boroughs has been tremendous. While the Manhattan submarket (defined as south of 96th Street on the East Side and south of 110th Street on the West Side) always leads the city out of downturns (as it did last year), the other submarkets have been performing much better than Manhattan on a relative basis.
Looking at the numbers shows us how well the other submarkets are performing.
Northern Manhattan is clearly leading the way among these submarkets.
Since the first quarter of 2012, sales volume has increased to $551 million, which, if annualized, would lead to $734 million for the year. That level would be more than double the $363 million seen in all of 2011. From the perspective of the number of properties sold, the data is equally impressive. Thus far in 2012, 177 properties have traded hands, already well above the 124 that sold in all of last year. If annualized, this year’s total would lead to 236 for the year, which would represent a 90 percent
increase over last year.
Just behind Northern Manhattan is Brooklyn, where demand for investment properties has rivaled some neighborhoods in Manhattan. Between the first and third quarters, the dollar volume of sales in Brooklyn was $2.26 billion—well above the $1.7 billion in all of last year. If annualized, this means Brooklyn would see about $3 billion in sales volume in 2012, a 78 percent increase. In terms of number of properties sold, there have already been 859 properties sold in 2012. This market is on pace for 1,145 property trades, up 47 percent from the 780 sold in all of last year.
In Queens, the first three quarters of this year have produce $1.3 billion in sales volume, just shy of the $1.35 billion of volume in all of 2011. Annualizing this year’s activity leads to an expected $1.74 billion in sales volume, which would be an increase of 29 percent over last year’s total. Thus far in 2012, 350 properties have sold, on target for 467 this year. If this pace holds up, the number of properties sold in Queens this year will rise 25 percent over last year’s total.
Lastly, activity in the Bronx is also on pace for healthy gains over 2011 levels. The dollar volume thus far has been $688 million, which, if annualized, will lead to about $918 million, reflecting a 21 percent increase over the $757 million seen last year. In terms of the number of properties sold, in the first three quarters of this year 265 properties have traded hands, eclipsing the 242 sold in all of last year. At this pace, the year will finish with 353 properties sold, a 46 percent increase.
It’s great to see healthy activity levels in these submarkets. With the expectations of a busy fourth quarter, the numbers should finish even higher.
Robert Knakal is the chairman and founding partner of Massey Knakal
Realty Services; he has brokered the sale of more than 1,250 properties in
his career, with a market value in excess of $8.5 billion.