NYC Apts. See Best Quarter in Two Years

NEW YORK CITY—Multifamily dollar volume rose 46% year-over-year across the four largest boroughs in the third quarter, reaching $3.258 billion, says Ariel Property Advisors in a quarterly report. It was the sector's best showing citywide since the fourth quarter of 2012.

The jump in transaction volume, while smaller, was nonetheless healthy at 16%, with 213 deals of $1 million or more completed in Q3 across Manhattan, the Bronx, Brooklyn and Queens, compared to 184 in Q3 2013. An even better result was the quarter-to-quarter increase, with Q3 transaction volume improving on Q2 by 26%, while dollar volume rose 74%.

“Third-quarter volume was buoyed by 12 institutional-level deals in September at prices over $20 million, including three transactions that were over $200 million,” says Shimon Shkury, president of Ariel Property Advisors.  He says it's unique “in that the summer months were primarily dominated by smaller deals and, consequently, deal flow in the third quarter exceeded our expectations.”

Further, Shkury says, “With global instability pushing rates lower and sustained demand meeting constrained supply, we expect this market strength to carry into the remainder of the year.”

Propelled by a number of large institutional transactions, Manhattan south of 96th Street was the scene of nearly half the dollar volume in Q3 at $1.4 billion. The borough's pricing continues to be stronger than ever, with the six-month trailing average price per square foot increasing 31% from a year ago to $844 per square foot from $647 the year prior.

While dollar volume in Northern Manhattan clearly was lower, its other Q3 metrics were strong. The submarket saw a 41% increase Y-O-Y in transaction volume to 45, a 29% increase in building volume to 88 and a 36% gain in dollar volume to $508 million.

Brooklyn did even better in dollar volume, with a Y-O-Y gain of 50% to reach $505 million in Q3, while transaction volume rose 15% to 54 in from a year earlier. As an illustration of the surge in pricing, a 52-unit package of walk-up buildings at 107-113 Greenpoint Ave. in the Greenpoint section recently sold for $23.75 million, or $616 per square foot.

The Bronx has had a strong year thus far, and Q3 continued that streak, with dollar volume increasing 24% Y-O-Y to $415 million year-over-year while remaining steady quarter-to-quarter. There was a slew of transactions over $10 million, including the sale of2230 Grand Concourse for $10.2 million, or $166 per square foot, that solidified the borough's strong quarter. In terms of pricing, Ariel notes that the Bronx has seen an impressive drop of 128 basis points in its six-month trailing average cap rate from the year prior, decreasing from 7.48% to 6.20%.

Although its dollar volume was the smallest, Queens saw the highest Y-O-Y and quarter-to-quarter increases: 165% and 355% percent, respectively, to $347.78 million. More than half the total was attributable to a single deal, on a $216-million, 1,269-unit portfolio sale in Kew Gardens. Meanwhile, a handful of other institutional transactions over $15 million in Elmhurst, Hollis and Murray Hill helped grow the Queens numbers as well.