With investment real estate properties in New York City selling at all-time highs, many price motivated investors are selling their City assets and looking further north for opportunities to reinvest their winnings. Among the markets in which they are investing is Westchester.
Multifamily assets in Westchester have achieved all-time high values since the end of the Great Recession. The past year has resulted in markedly more aggressive pricing. Whereas Northeast Private Client Group reported multifamily properties in lower Westchester were trading at prices of 7x gross rent multiple and/or 7% cap rate back in 2014, comparable properties are coming to market at 9x rent and sub-6% cap pricing on current Net Operating Income.
The Wall Street Journal reported back in January that renters were being priced out of the New York City market which was driving demand for multifamily units in Westchester. Consequently, developers were eyeing Southern Westchester communities like Yonkers and New Rochelle to develop new multifamily properties. In addition, New Rochelle and Port Chester have since rezoned downtown areas to encourage mixed-use projects.
“New zoning regulations present an opportunity for investors to become early adopters,” submarket specialist Steven D’Ambrosio of Northeast Private Client Group noted. “Vacant retail or commercial space in many of Westchester markets is prime for adaptive reuse and presents an opportunity for investors to repurpose assets and make capital improvements to maximize their value.”
Retail and mixed-use investment properties north of the City are also experiencing increased demand and achieving higher sales prices. So far this year, Northeast Private Client Group has brokered several sales to Manhattan-based 1031-exchange clients, including a 21,000 SF net-leased retail property in Hartsdale, NY (Westchester) which sold for $8,840,000 (6.9% cap), a mixed use property in Mahopac, NY (Putnam) which sold for $1,800,000 (7.0% cap), and a multifamily property in Yonkers which just traded at nearly 8x Gross Rent.
Data also shows Westchester’s office market is strong. Leasing figures for Class-A and Class-B assets during Q1 2016 were 28 percent above the county’s historical average and 36.7 percent higher than Q1 2015, according to Newmark Grubb Knight Frank. Further, 20,000 jobs were added in Westchester County from Q1 2015 to Q1 2016.
“Westchester is a more economical alternative to booming New York City markets such as Brooklyn, Manhattan and the Bronx,” D’Ambrosio noted. “Investors have the opportunity to purchase properties with the potential to add value and command top asking rents given the prices New York City transplants are accustomed to paying.”
Northeast Private Client Group currently has Class-B and Class-C investments available in Westchester and the lower Hudson Valley which provide the opportunity for investors to reposition properties and raise rents.
For investors who are looking to reinvest proceeds from sales in Manhattan and the other Boroughs, the Westchester investment real estate market has great potential.
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