The Commercial Observer reports 2016 investment sales activity in Manhattan came in at $57.8 billion, down 25-percent from its 2015 record of $77.1 billion. New York City’s multifamily market hit a 5-year low in 2016, accruing only 656 multifamily transactions. While Queens saw a 59-percent increase in multifamily deal volume, multifamily deal volume in Brooklyn declined 28-percent and the Bronx declined 17-percent, according to The Real Deal.
While New York City building sales transactions declined in 2016, real estate investors continue to explore value-add opportunities in secondary submarkets such as Westchester County and the Lower Hudson Valley. In 2016, investors closed on 51 multifamily transactions of $1 million to $10 million in Westchester and Rockland counties, up from 27 transactions in 2015 — an 88-percent increase year-over-year. The increased competition for Westchester and Rockland County assets drove the average price per unit from $131,000 (2015) to $153,000 (2016), as cap rates compressed from 7.7% (2015) to 6.7% (2016).
The Yonkers submarket accounted for 55-percent of the 2016 deal flow in Westchester and Rockland counties, up from 33-percent of sales activity in 2015, due to its large inventory of value-add multifamily and mixed-used properties.
The White Plains submarket took second place for 2016 deal flow in Westchester and Rockland counties with 10-percent of the year’s activity. In 2015, the New Rochelle submarket held second place behind Yonkers with 22-percent of $1 million to $10 million multifamily deal flow. Port Chester and Mount Vernon, tied for third place in 2015, were replaced by increased transactional activity in the Monsey (Rockland) submarket in 2016.
Northeast Private Client Group continues to be the market leader for value-add multifamily and mixed-use assets in the secondary submarkets outside New York City. Current listings include several multifamily and mixed-use assets in Yonkers, White Plains and Northern Westchester.
Further afield, the Putnam, Dutchess and Orange County submarkets offer even more generous pricing, with average cap rates of 10-percent on $1 million to $10 million multifamily assets, and prices per unit well below $100,000. Northeast Private Client Group actively represents Lower Hudson Valley properties to New York City-area investors, including current listings in Poughkeepsie, Middletown and Newburgh.
As we look ahead to what the 2017 investment real estate market will bring, it is likely that investors who have been priced out of the New York City market will continue to explore opportunities beyond the five boroughs. Office vacancy rates in Westchester have begun to improve and new businesses are moving into the region, which is likely to further drive demand for workforce-level multifamily housing across the county. Undervalued Class-B and Class-C assets in lower Westchester, Rockland and the Hudson Valley as a whole will remain attractive assets for investors, as they present opportunities to make capital improvements and increase asking rents in the face of continued demand for multifamily housing units. For more information on 2017 real estate investing opportunities, view our current listings.