This week we’re highlighting the legal challenge to the city’s property tax policies, the spike in foreign investment in Manhattan’s office sector last year, and updates on developments around the city.
The New York City property tax system violates the constitution and Federal Fair Housing Act, according to a class-action lawsuit filed in the state Supreme Court in Manhattan. The lawsuit claims that because rental buildings are taxed at a higher rate, property taxes are disproportionately passed along through rents to blacks and Hispanics who make up more than half of the city’s renters. Property tax rates are lower for co-ops, condos, and single family homes.
Foreign investors bought $5.5 billion worth of office properties in Manhattan in 2013, nearly twice the amount they purchased at the peak in 2007 and 28 percent of all the office buildings sold in the borough last year. Two of the largest transactions were made by Chinese investors–one that acquired the 60-story One Chase Manhattan Plaza for more than $700 million, and another that invested $700 million in the GM Building. Other big deals include a Canadian firm’s $900 million majority stake in the 44-story tower at 1211 Sixth Avenue, and the Abu Dhabi Investment Authority’s $650 million investment in the Time Warner Center.
Exterior Street between 138th Street and 149th Street along the Harlem River in the Port Morris section of the South Bronx is being targeted as the location for a Brooklyn Bridge Park-type development. The South Bronx Overall Economic Development Corporation released a preliminary analysis stating that more than 2,000 units of housing, 1.5 million square feet of commercial space, and 500,000 square feet of community facility space, public parks, and waterfront access could be developed in the former manufacturing district. Bronx Borough President Ruben Diaz Jr.is using the nonprofit’s plan as a “blueprint” to generate support for the project.
National retailers have been signing leases at a rapid pace at major shopping center developments currently under construction in the Bronx. More than 1.4 million square feet of retail space is expected to come on line in the next few years at Broadway Plaza, Mall at Bay Plaza, Riverdale Crossing, and other projects. The Bronx is attractive to retailers because it is the third most densely populated borough in the country, and rents are far below Manhattan rents.
The Planning Commission will vote this week on the Domino Sugar refinery development in Williamsburg, Brooklyn. The project, which would set aside 660 of the 2,300 apartments for low- and moderate-income tenants and create park and office space, has been approved by Community Board 1 and former Brooklyn Borough President Marty Markowitz. The NY Times reported that the de Blasio administration is seeking more space for affordable housing in exchange for a variance to increase the height of the project’s four towers.
Before beginning the formal city review process, the proposed 50-story residential and hotel tower next to Pier 17 in the South Street Seaport will be reviewed by the “Seaport Working Group” made up of elected officials, community and business leaders, and representatives from the developer Howard Hughes. The developer has already started construction on a mall on Pier 17.
A 300,000-square-foot tower featuring rental units and retail space is planned for 210 Livingston Street in downtown Brooklyn. Since 2006, 42 new residential projects with more than 8,000 units have been completed or are under construction in the area, which was rezoned in 2004 to encourage new investment. Additionally, 1.5 million square feet of retail space and 332,000 square feet of office space have been added.
In order to cut energy costs, grocery wholesaler Jetro Cash and Carry has installed 4,760 solar panels on the roof of its depot facility in the Hunts Point section of the Bronx. The solar panels are expected to generate 1.8 million kilowatt hours of clean energy per year. It is the largest solar panel installation in New York City.
Archive for the 'Market Watch' Category
This week we’re highlighting the legal challenge to the city’s property tax policies, the spike in foreign investment in Manhattan’s office sector last year, and updates on developments around the city.
This week we’re highlighting the Bronx State of the Borough address, a glimpse at the mayor’s new affordable housing policy, and development news from around the boroughs.
Bronx Borough President Ruben Diaz Jr. said in his State of the Borough address that in the next four years he will continue to bring responsible development to every corner of the “New Bronx.” Since 2009, the Bronx has attracted $5.768 billion in total development and created more than 13,000 new units of housing and more than 14,000 new jobs. He highlighted accomplishments such as the new retail mall at Bay Plaza, relocation of FreshDirect to the Bronx, new golf course at Ferry Point Park, and the Kingsbridge National Ice Center, and noted that the borough is safer than ever.
Bay Plaza, a 780,000-square-foot mall under construction at the intersection of I95 and the Hutchinson River Parkway in the Bronx, is scheduled to open in August. The new enclosed mall will feature over 100 new stores including H&M, Victoria’s Secret, American Eagle, the GAP, and Aeropostale, and restaurants including Joe’s Crab Shack and Olive Garden. It is located adjacent to the 1.3 million-square-foot Bay Plaza Shopping Center, which has served the North Bronx for more than 25 years.
Mayor Bill de Blasio told real estate executives that he would approve residential developments with greater height and density to achieve his goal of creating 200,000 new units of affordable housing. He made the remarks at a closed-door meeting with the executive board of the Real Estate Board of New York.
Housing First, consisting of 40 affordable housing groups, estimates that the city will need to allocate about $600 million a year beginning with this fiscal year in order to meet the de Blasio administration’s goal of 200,000 affordable units in 10 years, according to a WSJ article. About $200 million a year was allocated in the Department of Housing Preservation & Development’s capital budget during the Bloomberg administration. Creating new units will be more challenging today because federal funding has been cut by nearly 50 percent and interest rates and construction costs are expected to rise. Administration officials, however, expect to deliver a plan by May 1 outlining how the 200,000 units will be created.
In its 3rd Quarter 2013 Housing Update, the NYU Furman Center found that Manhattan sales prices increased by 11.5 percent year-over-year, reaching a new peak for the second consecutive quarter. Sales prices in Brooklyn rose 15 percent in the 3rd quarter from 2012, while the Bronx and Queens had increases of over 10 percent. The report also showed that residential property sales volumes increased in each borough compared to the previous quarter and the same quarter last year, but volume is still below the peak years of 2005, 2006, and 2007. Nearly 4,000 new residential building permits were authorized in the third quarter 2013, which is 1,204 more than the previous year, but 295 lower than the second quarter 2013.
An agreement has been reached to allow SUNY Downstate to exit Long Island College Hospital no later than May 2014 and end the litigation that has forced it to keep the hospital open. Community and elected officials will help select a new health care facility for the site through an expedited RFP submission process, followed by a seven day selection period. The agreement requires court approval, and previous bidders will be required to resubmit proposals. SUNY, which has been losing $13 million a month honoring the court order to keep LICH open, determined the agreement was the only course to protect students and SUNY campuses across the state from continued exposure to the mounting fiscal crisis at LICH.
Manhattan’s Community Board 11 voted to approve a zoning variance allowing more retail and less parking at a 32-story residential complex planned for 1800 Park Avenue at E. 125th Street in Harlem. Under the proposal, retail space will increase to 63,200-square-feet on the first and second floors, and parking will be cut from 304 spaces to 123. Continuum Co. is developing two residential towers, which are scheduled for completion in 2017.
The NYC Economic Development Corporation filed papers to preserve the city’s right to use eminent domain as a last resort in order to develop a six-acre, Urban Renewal Area bordered by East 125th and East 127th Streets and Second and Third Avenues in East Harlem. A $700 million, 1.7 million-square-foot East Harlem. Media, Entertainment, and Cultural Center was originally planned for the location but the developers were unable to follow through with their proposal. To date, only an affordable housing project with 48 units has been built on the site, but the city plans to seek other developments.
The NYC Landmarks Preservation Commission has proposed that a 16-block section of Bedford Stuyvesant bordered by Gates Avenue, Fulton Street, Bedford Avenue, and Tompkins Avenue be designated a historic district. Opponents of the creation of the Bedford Historic District fear that renovation costs would increase and onerous regulations would make improvements difficult, while supporters believe the designation would preserve the area’s historic structures and individual property values. Stuyvesant Heights, also in Bed Stuy, was named a historic district in 1971 and an extension was approved last year.
Broadway Stages, one of New York City’s premier full-service film, television and music video production companies, plans to purchase the former Arthur Kill Correctional Facility on Staten Island for $7 million and invest at least $20 million to transform the site into a film, television and music production facility. The company plans to construct five new sound stages totaling 100,000 square-feet while aiming to create 800 jobs over the next two years, and as many as 1,500 jobs in the next five years. Broadway Stages currently operates facilities in Brooklyn and Queens, with 27 stages totaling over 1 million square-feet.
This week we’re highlighting a report on NYC construction starts, the mayor’s new appointments, and testimony from the new Fed chairwoman.
New York City construction starts reached $18.8 billion in 2013, an 11 percent increase from 2012, according to a New York Building Congress analysis of McGraw-Hill Construction Dodge data. Construction starts in the public works sector increased by 82 percent last year – from $2.3 billion in 2012 to $4.3 billion in 2013 – primarily due to major projects for the Goethals Bridge; Bayonne Bridge in Staten Island; Verrazano-Narrows Bridge; and mass transit. Housing starts reached $6.3 billion in value in 2013, a 17 percent increase from 2012, but non-residential projects fell 10 percent from $9.3 billion in 2012 to $8.3 billion in 2013.
Mayor Bill de Blasio appointed Vicki Been as the new commissioner of the Department of Housing Preservation and Development, and Gary D. Rodney as president of the Housing Development Corporation. He also named Shola Olatoye as chair of the New York City Housing Authority, and Cecil House as the authority’s general manager. The mayor said he will unveil his affordable housing plan on May 1, and at that time will explain how he plans to build and preserve 200,000 units of affordable housing in the next 10 years.
Janet L. Yellen, the new head of the Federal Reserve, said she plans to continue the policies adopted under former Chair Ben S. Bernanke. In testimony before Congress, she explained that the Fed will continue to reduce its monthly bond-buying program unless there is a “notable change” in the economy. She acknowledged, however, that the labor market is still recovering.
A survey of small businesses in New York, New Jersey, Connecticut, and Pennsylvania showed that that credit market has improved for experienced and profitable firms, and that overall small firms have a positive outlook for the first half of 2014. More than half of the respondents expected revenues to increase, 30 percent expected to add employees, and 29 percent plan to apply for credit in the first half of 2014. The survey was released by the Federal Reserve Bank of New York.
The median rent for apartments in Brooklyn increased 12 percent to $2,830 in January 2014, compared to January 2013, and rose 6.4 percent from December, the Elliman Report shows. Median rents in Manhattan dropped 1.1 percent to $3,114 in January 2014 from January 2013, and concessions by landlords increased to a 13.1 percent market share. The Manhattan vacancy rate, however, fell to 1.81 percent in January from 2.79 percent in December.
Slate Property Group is planning two market-rate residential developments with luxury-level finishes at 83 Bushwick Place in Bushwick, Brooklyn, and 176 Woodward Avenue, in Ridgewood, Queens. The developer is seeking to rezone the Ridgewood property from manufacturing to residential in order to build 88 units. The Bushwick property will have 20 units and approval has already been given to rezone the site from manufacturing to residential.
About half of the 83 condos offered at the Adeline, a Central Harlem development at 23 West 116th Street, were sold in its first month of sales. The development, which is expected to be completed in the fall, offers one- through four-bedroom units that range in size from 1,046 to 1,912 square feet. Two-, three-, and four-bedroom condos start at $1.025 million. The project is being developed by L+M Development Partners.
The NY Times profiled Bedford Park in the north-central section of the Bronx, calling it as stable and affordable neighborhood. Close to transportation hubs, Moshulu Parkway, and the New York Botanical Garden, the area is attracting residents from Manhattan, Queens, and Brooklyn in search of housing. The median price for a one-bedroom co-op is $119,000, two-bedroom co-ops start around $149,000, and single-family homes sell for between $300,000 and $400,000.
Ariel Property Advisors released its 2013 investment sales reports for Queens, The Bronx, and Manhattan, all of which showed year-over-year increases in the dollar volume of investment property trades last year.
Queens real estate had a tremendous year in 2013 as the borough saw major multifamily transactions and a resurgent market for development sites drive big gains in sales and dollar volume, according to Ariel Property Advisors’ Queens 2013 Year-End Sales Report.
For the year, Queens saw 519 transactions consisting of 702 properties totaling approximately $2.785 billion in gross consideration. This translates to a 58 percent increase in transaction volume, a 66 percent increase in property volume, and a tremendous 46 percent increase in dollar volume compared to 2012, which saw 328 transactions comprised of 423 properties totaling $1.909 billion in gross consideration. Nearly two-thirds of these transactions took place in Northwestern Queens.
The Queens multifamily market took off in 2013 soaring 166 percent year-over-year to $1.355 billion and capturing 49 percent share of the borough’s investment property sales volume. There were 223 multifamily transactions in Queens comprised of 287 properties, a 39 percent increase in transactions and a 51 percent increase in the number of properties sold compared to 2012.
Highlights from Queens report:
For the year, average cap rates fell to 5.21 percent from 6.06 percent in 2012; average gross rent multiples rose to 11.16 from 9.29; the average price per square foot rose to $217 from $179; and the average price per unit increased to $185,408 from $136,918.
Development site sales took a 35 percent share of both the investment property transaction and dollar volume in Queens in 2013. Transactions of development sites in Queens increased 78 percent to 180 in 2013 compared to 2012, the number of development sites traded rose 55 percent to 249, and the dollar value of those trades increased 59 percent to $987 million.
The Queens 2013 Year-End Sales Report tracks development, multifamily, industrial, and other commercial property sales over $850,000. A copy of Ariel Property Advisors’ Queens 2013 Year-End Sales Report is available at http://arielpa.com/newsroom/report-APA-Queens-2013-Sales-Report.
Large multifamily portfolio transactions and significant retail trades contributed to a 23 percent increase in investment property transactions in the Bronx and a 13 percent increase in the dollar volume of those trades in 2013 compared to 2012, Ariel Property Advisors’ Bronx 2013 Year-End Sales Report .
In 2013, the Bronx saw 295 transactions comprised of 474 properties totaling $1.674 billion in gross consideration, compared to 2012, which saw $1.479 billion in sales over 240 transactions comprised of 373 properties. The 2013 figures also represent a significant jump in transactions and dollar volume from 2011 levels.
The borough’s growing population led buyers to invest in housing in 2013 and multifamily sales dominated the Bronx investment market capturing 59 percent of the borough’s transaction volume and 65 percent of the dollar volume. The sales report shows 175 multifamily transactions comprised of 283 buildings valued at more than $1 billion dollars, a 25 percent increase in transactions, 30 percent increase in properties sold, and 11 percent increase in dollar volume.
Cap rates fell to 7.71 percent in 2013 from 8.05 percent in 2012, and year-over-year the GRM increased to 7.24 from 7.04, price per square foot rose to $112 from $97, and price per unit increased to $106,000 from $90,108. Multifamily investment activity clustered around the western neighborhoods of the Bronx, with Riverdale attracting buyers willing to buy market-rate multifamily buildings for a 5 cap and 10 times the gross rent.
Highlights from Bronx report:
Investment in commercial sites resulted in 11 percent of the transactions and 15 percent of the dollar volume for the borough. The dollar volume of these deals totaled more than $253 million, which is a 190 percent jump from 2012, but the 38 properties sold in 32 transactions were flat year-over-year.
Development transactions generated 24 percent of the borough’s total investment transactions. A total of 72 development, industrial, and garage transactions consisting of 122 properties changed hands, a 33 percent and 22 percent increase, respectively. The total value of transactions was $199 million, which represents a 42 percent decline year-over-year, but land values are increasing with average price per buildable square foot increasing from $30 to $32.
The Bronx 2013 Year-End Sales Report tracks investment property sales $850,000 and over. A copy of Ariel Property Advisors’ Bronx 2013 Year-End Sales Report is available at http://arielpa.com/newsroom/report-APA-Bronx-2013-Sales-Report.
The number of investment properties sold in Manhattan declined slightly in 2013 from 2012, but the dollar volume of those deals increased a healthy 24 percent to $27 billion, Ariel Property Advisors’ Manhattan 2013 Year-End Sales Report shows. The report covers the real estate market south of E. 96th Street and south of West 110th Street, and transactions $1 million and above.
For the year, Manhattan saw a total of 672 transactions comprised of 852 properties totaling $27.018 billion in gross consideration, compared to 2012, which saw $21.800 billion in gross consideration through 765 transactions comprised of 935 properties.
The multifamily product class remained strong in 2013 taking 41 percent of Manhattan’s investment property transaction volume and 25 percent of its dollar volume. In 2013, there were 276 multifamily transactions comprised of 391 properties totaling $6.638 billion in gross consideration. Multifamily pricing, aided by rising rents and low interest rates strengthened throughout the year and pushed the average capitalization rate down to 4.36 percent, from 4.681 percent in 2012. The average price per square foot climbed to $648 from $560 in 2012 and the average gross rent multiple climbed to 15.60 from 13.74 in 2012.
Highlights from Manhattan report:
Record high rents and condo / coop sales prices – along with scarce new condo product lent tremendous momentum to Manhattan development sites sales in 2013, which exhibited a 79 percent increase in total dollar volume over 2012, the largest increase among all asset classes, with $4.9 billion in gross consideration. The highest number of development site transactions in 2013 were concentrated in Chelsea (12) and SoHo (10).
The office market jumped 52 percent to $12.196 billion in gross consideration in 2013 versus $6.008 billion in 2012. While there was a 25 percent and 27 percent decrease in transaction volume and property volume, respectively, the high dollar volume is reflective of transactions involving institutional investors for properties such as 650 Madison Avenue, a 27-story, 600,496-square-foot office tower that traded for $1.3 billion.
For a copy of the Manhattan 2013 Year-End Sales Report, please see http://arielpa.com/newsroom/report-APA-Manhattan-2013-Sales-Report.
The U.S. economy added 113,000 jobs in January and the unemployment rate fell to 6.6 percent, the Labor Department reported. Private employers added 142,000 jobs but the number of government jobs declined by 29,000. Job losses were also reported in the education and health care sectors.
Carl Weisbrod has been named the new chairman of the city’s planning commission, Mayor Bill de Blasio announced. Mr. Weisbrod previously served as the founding president of the city’s Economic Development Corp., former president of the 42nd Street Development Project, executive director of the NYC Department of City Planning, one of the founders of the Alliance for Downtown New York, and as director of three government authorities: the Lower Manhattan Development Corp., Trust for Governors Island, and the Convention Center Development Corp.
Mayor Bill de Blasio said he will not recommend property tax increases in his fiscal 2015 budget proposal. But according to the Department of Finance, property tax assessments are set to increase by 8 percent in July, which will result in higher taxes for property owners. The tax assessment hike represents the second highest increase since the mid-1990s. At the end of fiscal year 2008, the height of the real estate boom, tax assessments rose to 8.1 percent.
Council Member Margaret Chin has introduced a bill in the City Council that would require property owners to pay for tenant relocation costs if residents are barred from returning to their apartments because of a fire or illegal or dangerous conditions. Owners would be required to set aside 10 percent of the building’s rent rolls for the previous five years in an escrow account as soon as a vacate order is issued.
Broker confidence increased in the fourth quarter of 2013 and brokers are optimistic about the first half of 2014 because of the improving economy, according to the Real Estate Board of New York’s (REBNY’s) Overall Broker Confidence Index for the Fourth Quarter of 2013. The Commercial Market Confidence Index increased to 9.49 in the fourth quarter from 9.18 in the third quarter.
The Postal Service has called for offers to buy the historic Bronx General Post Office at the corner of Grand Concourse and East 149th Street, which will help assess market interest in the four-story, 150,000-square-foot building. A formal request for proposals will follow. The sale is part of the Postal Service’s strategic plan to reduce its infrastructure and operating costs, but customers, community leaders, and elected officials are protesting the change.
Flushing, Queens, is attracting new hotels. The Parc Hotel, a 13-story, 96-unit hotel near Main Street and Roosevelt Avenue will be operated by the Real Hospitality Group and is scheduled to open in March. In addition, Starwood Hotels & Resorts Worldwide, Inc. is planning to complete a hotel at 35th Avenue and 114th Street by September 2015.
The Brooklyn-based nonprofit CAMBA announced plans to build CAMBA Gardens II, a 293-unit, 97,000-square-foot, state-of-the-art affordable housing complex at 560 Winthrop Street in the Wingate section of Brooklyn. The current building, which housed Kings County Hospital’s psychiatric ward until 2009, will be razed. The organization built the 209-unit CAMBA Gardens I on the site of other former hospital buildings around the corner at 690 and 738 Albany Avenue.
Ariel Property Advisors released its 2013 Brooklyn and Northern Manhattan Sales Reports highlighting healthy increases in investment property sales in both submarkets, which benefited from a year of low interest rates and solid fundamentals.
Northern Manhattan’s investment property transactions rose 16 percent, the number of properties sold increased 44 percent, and the dollar volume of those trades jumped 83 percent in 2013 from 2012, according to Ariel Property Advisors’ Northern Manhattan 2013 Year-End Sales Report .
In 2013 Northern Manhattan saw 310 investment property transactions consisting of 534 properties totaling approximately $2.12 billion in gross consideration, compared to 2012, which saw 268 transactions comprised of 371 properties totaling $1.166 billion in gross consideration.
Multifamily pricing in 2013 was the strongest it’s been since the 2007 peak as average capitalization rates and the average price per unit hit record levels. For the year, the average capitalization rate came in at 5.04 percent, which is lower than 2012’s rate of 6.52 percent, and includes a multitude of deals that took place in the low 4 percent cap rate range. The average gross rent multiples also climbed steeply to 11.04 from 9.33 in 2012.
Highlights from Northern Manhattan:
The multifamily sector accounted for 47 percent of the investment property transactions uptown and 77 percent of the dollar volume during the year. The area saw 147 multifamily transactions comprised of 344 properties totaling $1.656 billion in gross consideration, a 57 percent increase in the number of properties sold, and a 100 percent jump in dollar volume compared to 2012. Much of the multifamily activity was the result of large portfolio transactions.
Development site transactions in Northern Manhattan increased 13 percent to 43, and the dollar value of those trades jumped 91 percent to $227 million.
The year ended with the average price per buildable square foot for vacant land coming in at $119, a figure that surpasses the average price of $115 seen in 2007. While the sample size of vacant buildings is not large, strength in the market can also been seen in the average price per square foot for vacant buildings of $291, the highest level seen since 2008 and more than 50 percent higher than 2012.
The Northern Manhattan 2013 Year-End Sales Report tracks development, multifamily, industrial, and other commercial property sales over $850,000 north of E. 96th Street and north of W. 110th Street.
A copy of Ariel Property Advisors’ Northern Manhattan 2013 Year-End Sales Report is available at http://arielpa.com/newsroom/report-APA-N-Man-2013-Sales-Report.
A surge of multifamily and development site sales in Brooklyn led to a 31 percent increase in investment property transactions and a 30 percent increase in the number of investment properties sold in 2013 compared to the previous year, according to Ariel Property Advisors’ Brooklyn 2013 Year-End Sales Report. Dollar volume declined year-over-year by 4 percent, however, largely because there were fewer high value institutional deals in 2013.
During the year, Brooklyn saw 1,047 transactions comprised of 1,388 properties totaling $4.052 billion in gross consideration, compared to 799 transactions comprised of 1,064 properties valued at $4.2 billion in 2012. The neighborhoods of Bedford-Stuyvesant, Bushwick, and Crown Heights together recorded the highest number of transactions and properties sold in Brooklyn in 2013.
Brooklyn’s development sector captured 45 percent of the total dollar volume for the investment property sales market in Brooklyn in 2013 and 29 percent of the transaction volume, while the multifamily sector took a 63 percent share of the borough’s investment property transactions and 47 percent of the dollar volume.
Highlights from Brooklyn report:
Development site transactions in Brooklyn increased 21 percent year-over-year to 301, the number of properties traded rose 35 percent to 520, and the dollar volume of those trades jumped 45 percent to $1.8 billion. Williamsburg recorded the most development trades with 40 development transactions comprised of 74 properties totaling $284 million, but demand also was great for development sites in nearby neighborhoods Bedford Stuyvesant and Bushwick where the average price per buildable square foot for some development sites more than doubled in 2013.
Brooklyn’s multifamily transactions jumped 44 percent year-over-year to 657, the number of properties sold increased 36 percent to 760, and the dollar volume of those trades rose 29 percent to $1.9 billion
The demand for multifamily product put upward pressure on pricing and resulted in borough-wide average cap rates falling to 5.75 percent in 2013 from 6.95 percent in 2012, and borough-wide average gross rent multiples increasing to 11.24 from 9.26. High-end submarkets in Brooklyn commanded capitalization rates and rent multiples on par with Manhattan prices.
The Brooklyn 2013 Year-End Sales Report tracks development, multifamily, industrial, and other commercial property sales over $850,000.
A copy of Ariel Property Advisors’ Brooklyn 2013 Year-End Sales Report is available at http://arielpa.com/newsroom/report-APA-Brooklyn-2013-Sales-Report.
Real gross domestic product — the output of goods and services produced by labor and property located in the U.S. —i ncreased at an annual rate of 3.2 percent in the fourth quarter of 2013, according to the Commerce Department’s preliminary estimate. In the third quarter, real GDP increased 4.1 percent. The economy in the second half of 2013 was its strongest since the second half of 2003.
The Federal Reserve voted to reduce its bond-buying program by another $10 billion to $65 billion in February due to optimism about the health of the economy. The move is the second $10 billion cut announced since December. The Fed initiated its $85 billion a month purchases of Treasury and mortgage-backed securities in 2013 to help create jobs. The bond purchases could end all together by October or December.
The unemployment rate in New York City dropped to 7.5 percent in December 2013 from 8.8 percent in December 2012, the State Labor Department reported. All five boroughs also reported falling unemployment rates. The unemployment rate fell to 6.2 percent in Manhattan; fell to 6.6 percent in Staten Island; fell to 6.7 percent in Queens; fell to 8.2 percent in Brooklyn; and fell to 10.6 percent in The Bronx.
Because the demand for tax-exempt bonds issued through the 80/20 program exceeded the supply, the State Division of Homes and Community Renewal announced that the state will spread 80/20 subsidies in smaller amounts over more projects. The change will free up more tax-exempt bonds for affordable projects, experts said. Gov. Andrew Cuomo also has announced expanded housing subsidies for affordable housing.
Real estate industry leaders shared their views in an article for the Mortgage Observer about how Mayor Bill de Blasio can create 90,000 new units of affordable housing and preserve another 110,000 in the next ten years. Low-Income Housing Tax Credits remain available, but additional financing from public and private lending sources will be needed, which is a challenge because of cuts in federal programs supporting affordable housing and limited city and state resources. In addition, there are fewer empty buildings and tax lots than there were when Mayors Koch and Bloomberg launched their housing plans, which has increased competition for available land.
At a Crain’s forum for the city’s five borough presidents, Brooklyn Borough President Eric Adams discussed selling air rights and establishing “land banks” that would fund affordable housing. He said he hopes to continue to attract residents to Brooklyn, revitalize neighborhoods like East New York and Brownsville, and help Coney Island recover from Hurricane Sandy. Bronx Borough President Ruben Diaz Jr.is working to ensure that the MTA adds four Metro-North stations in the Bronx, which will spur development in the eastern part of The Bronx.
Mount Morris Park in Harlem will soon welcome a beautification project on Lenox Avenue and a Whole Foods on Lenox Avenue between 124th and 125th Streets in 2015, according to a WSJ profile of the area. As recently as the 1980s drug dealers challenged the community but today some renovated brownstones are selling for $3 million, Marcus Garvey Park has been improved, and new restaurants and retail shops are opening. The result is the area has earned the nickname the “West Village of Harlem.”
Seven new businesses have opened on Myrtle Avenue in the Clinton Hill section of Brooklyn in the last eight weeks and another six are set to open, according to a profile of the area in the Daily News. No longer feared as “Murder Avenue,” the commercial corridor is now a friendly shopping strip for restaurants, retailers, and families. Retail rents in the area are $37 per square foot.
The number of multifamily buildings sold in New York City jumped 19 percent to 1,230 and the dollar volume of those trades increased 4 percent to $8.87 billion in 2013 compared to 2012, according to Ariel Property Advisors’ Multifamily Year in Review: New York City. Multifamily transaction volume citywide fell a modest 3 percent year-over-year to 675.
“New York City multifamily assets saw aggressively higher prices throughout all submarkets and pricing metrics in 2013 as demand, driven by rising rents and low interest rates, continued to outpace supply,” said Shimon Shkury, president of Ariel Property Advisors. “Average capitalization rates dropped while gross rent multiples, prices per square foot, and prices per unit rose.”
The most significant pricing gains occurred in Northern Manhattan and Brooklyn, which saw cap rates decline by more than 100 basis points. Manhattan and Queens also saw significant gains, but to a lesser degree.
“While Manhattan saw a dip in its multifamily volume, multifamily sales in the other submarkets surged as did their pricing, suggesting that some investors typically focused only on Manhattan are now exploring less expensive offerings elsewhere in the city,” Mr. Shkury said. “Northern Manhattan and Queens, for example, had tremendous years. Northern Manhattan’s multifamily dollar volume hit $1.6 billion, which is more than double 2012 and the second highest dollar volume recorded for the city. Queens had an even bigger year, with a 214 percent jump in dollar volume year-over-year to $1.088 billion.”
Portfolios sales also dominated the market in several key neighborhoods within the city, especially Manhattan’s East Village and Upper West Side; the Fordham and Mount Hope areas of The Bronx; Crown Heights and Flatbush in Brooklyn; Jackson Heights and Sunnyside in Queens; and Central Harlem and Washington Heights in Upper Manhattan.
The following is a breakdown of the 2013 multifamily data by submarket:
Northern Manhattan. There were 116 transactions comprised of 312 buildings in Northern Manhattan, a 62 percent year-over-year increase in the number of buildings sold and the highest level in the city. Dollar volume for Northern Manhattan jumped 103 percent to $1.6 million, more than any other submarket except for Manhattan below 96th Street. Average capitalization rates dropped more than 100 basis points to 5.04 percent and gross rent multiples broke 11 times. The average price per square foot rose 28 percent to $217 and the average price per unit increased 29 percent to $180,404. Central Harlem led the area in sales with 36 transactions totaling 155 buildings. East Harlem saw strong values with the average price per square foot of $299, though it is worth noting that this reflects several new construction, free market buildings that sold. Investors seem to be catching on to the positive economic impact various developments like the Columbia University Expansion, Whole Foods on Lenox Avenue, and the 125th Street revitalization will have on Northern Manhattan.
Queens. The borough’s 70 transactions comprised of 133 buildings totaling $1.088 billion in gross consideration shattered sales statistics seen 2012 and 2011. Many investors who previously searched for opportunities in Long Island City and Astoria turned their attention to properties in Elmhurst, Jackson Heights and Flushing, which is reminiscent of the early migration of investors into Brooklyn neighborhoods before their real estate booms. While portfolios played a major part in 2013, for the first time a number of market rate new construction properties traded for prices previously limited only to Manhattan and prime Brooklyn. This included the sale of 41-23 Crescent Street in Astoria for $688 per square foot and 30-50 21st Street & 11-15 Broadway for $443 per square foot.
Brooklyn. With 189 transactions comprised of 269 buildings, Brooklyn saw nearly the same number of transactions and portfolios change hands in 2013 as 2012, but the dollar volume of the trades rose 18 percent in 2013 to $1.2 billion. This illustrates that today’s properties are achieving higher prices than last year, especially since both periods saw a large portion of sales take place in Crown Heights and Flatbush. Prices gained significantly year-over-year, as the borough wide average cap rate dropped 91 basis points to 5.75 percent and the average price per square foot increased 22 percent to $233 per square foot. Crown Heights was the most transactional sub-market with 28 transactions totaling 45 buildings. Flatbush followed closely behind with 27 sales consisting of 34 buildings, but led the borough in dollar volume with $185 million in gross consideration. Williamsburg, Park Slope, and Brooklyn Heights were among the neighborhoods with the highest prices per square foot, while Bushwick and Crown Heights saw the steepest gains compared to last year.
The Bronx. The borough’s 156 sales comprised of 264 buildings totaling $1.075 billion in consideration represented increases of 17 percent, 26 percent, and 11 percent from 2012 levels. Strong increases were seen in pricing as the average price per square foot hit $112 and the average price per unit rose above $105,000. Investors last year paid more to buy in The Bronx with the average price per square foot topping $112 and the average price per unit reaching $105,000. This is a long way from prices seen during the recession that were as low as $70 per square foot and $70,000 per unit. The borough’s higher cap rates relative to the rest of the city continue to drive return, which is attracting yield-conscious buyers to the area. The Bedford Park section of The Bronx saw the most multifamily transactions and dollar volume with 16 transactions totaling $142 million in gross consideration.
Manhattan. Manhattan below 96th Street recorded fewer transactions in 2013 than 2012, with transactions declining 28 percent to 144, building volume dipping 14 percent to 252, and the dollar volume of those trades falling 28 percent to $3.897 billion. Rising rents, limited inventory and continued low interest rates, however, led to major pricing gains in Manhattan in 2013. The average capitalization rate dropped 45 basis points from 2012 levels to 4.36 percent, while the average price per square foot came in at $648 and the average gross rent multiple hit 15.6. The Upper East Side and Upper West Side saw the most transactions, with 24 and 23 respective sales. In terms of total buildings, the Upper West Side led with 51 properties trading, followed by the East Village which had 33 buildings change hands, largely through portfolio deals.
The multifamily transactions included in the analysis occurred at a minimum sales price of $1 million, with a minimum gross area of 5,000 square feet, and with a minimum of 10 units.
More information is available from Mr. Shkury at 212-544-9500, ext. 11, or email@example.com. For a copy of the report, please see http://arielpa.com/newsroom/report-MFYIR-2013.
New York City added a net of 94,500 new jobs in 2013, pushing the city’s December jobs total to 4,038,400, the highest level since 1969, the State Labor Department reported. In December, the city’s unemployment rate fell to 8.1 from 8.5 percent the previous month, and the state’s unemployment rate fell to 7.1 percent from 7.4 percent. Nationally, the unemployment rate is 6.7 percent.
Existing home sales nationwide — completed transactions that include single-family homes, townhomes, condos, and co-ops — increased 9.1 percent in 2013 from 2012 to 5.09 million sales, the National Association of Realtors reported. Sales in 2013 were the highest since 2006 when they reached 6.48 million. Market drivers included job growth, record low mortgage interest rates, and pent-up demand.
The de Blasio administration is crafting an affordable housing plan for New York City and is expected to invest as much or more in housing than Mayor Michael Bloomberg, according to Alicia Glen, the deputy mayor for housing and economic development. During the campaign the mayor said he wanted to raise taxes on vacant land as a way to encourage affordable housing development, require developers to include affordable housing in all major projects, and take control of rent regulation away from the state.
Officials broke ground on the first phase of a development that will transform an underused manufacturing area into Compass Residences Development, a 10-building residential complex on five acres in the West Farms and Crotona Park East sections of The Bronx. When it’s completed, the development will house 1,300 residential units, of which about 660 will be affordable, 46,000 square feet of retail, and public open space. The $350 million project is being developed by Signature Urban Properties.
The Downtown Brooklyn Partnership released its 2013 Programmatic Report boasting that 3,300 apartments are under construction in downtown Brooklyn, and another 9,000 units are in the pipeline. Also, nine large retail projects totaling 850,000 square feet will be completed in the next two to three years. Since 2006, the city has invested more than $400 million in infrastructure improvements in the area, which has attracted $5.2 billion in private investment.
Citing new and planned condos, rentals, retail, and schools, the NY Post claims that the South Street Seaport is the city’s next hot spot. A luxury cinema, new shops, and restaurants are among the amenities coming to the new Pier 17, where a 60-story residential/hotel tower also is planned. A private elementary school has been operating on Water Street since 2006, and a new public school will open nearby in 2015. Also, a 51-story, 96-unit, 114,000-square-foot condo is planned on Fulton Street between Gold and William.
The dollar volume of New York City multifamily transactions in November jumped 128 percent year-over-year and 114 percent month-to-month due to a number of large, institutional sales, according to Ariel Property Advisors’ Multifamily Month in Review for November. This activity suggests that the soon to be released fourth quarter figures will propel 2013 sales beyond the remarkably high levels seen in 2012, which were buoyed by the expiration of the Bush tax cuts.
In November, New York City saw 52 transactions comprised of 160 buildings totaling $1.334 billion in gross consideration, the highest monthly dollar volume this year. Year-over-year, transaction volume declined by 13 percent, and building volume rose 48 percent compared to November 2012, which saw 60 transactions comprised of 108 buildings totaling $585.028 million.
November’s figures also showed a 58 percent increase in building volume despite a modest 29 percent drop in the number of transactions compared to October, which had 73 transactions comprised of 101 buildings valued at $623.57 million.
“Owners are taking advantage of today’s very low capitalization rates and buyers are borrowing at historically low rates,” said Shimon Shkury, president of Ariel Property Advisors. “We think that some of the recent sales volume, especially on the institutional side, has been driven by both parties trying to take advantage of the attractive financing environment before a possible shift in 2014.”
The following is a breakdown of the November 2013 multifamily data by submarket:
Manhattan. Manhattan led the city in dollar volume with over $800 million in multifamily sales in November, which is a 410 percent increase compared to the previous month and a 149 percent increase compared to November of last year. This was made possible by three institutional transactions that saw pricing well above $150 million, the largest of which was 251 Cherry Street which reportedly sold for $280 million.
Northern Manhattan. Led by a single portfolio sale comprised of 84 buildings and totaling $350 million in gross consideration, Northern Manhattan saw a year-over-year 607 percent increase in building volume to 99, and a 768 percent increase in the dollar volume of those trades to $424 million. The pricing on that portfolio, which featured properties spread throughout the area, represented $230,000 per unit and $212 per square foot. Another notable transaction was the sale of 556-58 West 126th Street, a 40 unit building located on the cusp of Columbia’s new expansion that is currently under construction. The asset sold for $15 million, which represents $410 per square foot and $375,000 per unit – levels that are rarely seen uptown but are reflective of the neighborhood’s rapidly rising rents.
Brooklyn. With 11 transactions comprised of 17 buildings totaling $42.865 million in gross consideration, it was a relatively slow month for Brooklyn, which has been a consistent leader in transaction volume throughout the year. Pricing, however, remained strong, as evidenced by two notable sales in Northwest Brooklyn. A property at 139 Joralemon Street in Brooklyn Heights fetched $675 per square foot and almost $400,000 per unit, while 756 Union Street reached $470 per square foot in Park Slope. Brooklyn is now commanding the second highest price per square foot of any borough, with average cap rates closing in on 5 percent for multifamily properties.
The Bronx. The Bronx this month saw nine transactions comprised of 16 buildings and $36.435 million, a decline from previous levels. Though totals for the borough were on the lighter side this month, it is important to note that none of these sales occurred at lower than $90 per square foot, continuing the borough’s positive trend in pricing.
Queens. Queens had a representative month in November–seven transactions for 12 buildings valued at $28 million–after an unusually strong month of October. Transaction volume, building volume, and dollar volume were relatively stable year-over-year. Cap rates for the borough also continue to surprise some, remaining just below 5 percent on average.
Trailing 6-Month Sales Averages: For the six months ended in November 2013, the average monthly transaction volume dropped slightly to 64 transactions per month. For the fifth month in a row, the average monthly dollar volume rose, reaching $906.876 million in November. The six-month average dollar volume is at its highest point in over a year.
More information is available from Mr. Shkury at 212-544-9500, ext. 11, or firstname.lastname@example.org. For a copy of the report, please see http://arielpa.com/newsroom/report-MFMIR-Nov-2013.
The number of New York City homes sold during the fourth quarter rose 31 percent to 12,677 and the total value of these properties increased 29 percent to $9.6 billion, compared with the same quarter last year, according to a REBNY report. The average sales price fell 2 percent to $760,000 compared to the same quarter last year due to a higher percentage of sales outside of Manhattan, where the average price of a home is substantially lower.
Privately-owned housing starts in the U.S. were at a seasonally adjusted annual rate of 999,000 in December, which is 9.8 percent below the revised November estimate of 1,107,000, but 1.6 percent above the December 2012 rate of 983,000, the Commerce Department reported. Additionally, privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 986,000, which is 3 percent below the revised November rate of 1,017,000, but 4.6 percent above the December 2012 estimate of 943,000.
More businesses in New York state and Northern New Jersey are optimistic about the economy in the near-term and are planning to expand rather than reduce their workforces in 2014, according to the Federal Reserve’s Beige book of regional economic activity. The survey also found that small-to-medium sized banks reported a decrease in demand for consumer loans, especially residential mortgages, but no change in the demand for commercial loans and mortgages.
Preliminary assessments show that the market value of more than one million New York City properties increased 6.6 to $914.8 billion, which will translate to higher property taxes, the NY Post reports. Average property taxes for single-family homes will increase by 3.8 percent and co-ops will increase by 5.5 percent.
Time Warner Inc. announced plans to move 5,000 employees working in its executive offices and HBO, Turner Broadcasting, and Warner Brothers divisions to an 80-story building at 10th Avenue and 33rd Street in Hudson Yards by late 2018. The company will sell its existing headquarters at Columbus Circle to two sovereign wealth funds and the Related Companies for $1.3 billion.
Queens Plaza in Long Island City has received a $45 million makeover, transforming it from a haven for illegal activity into a pedestrian-friendly refuge designed to serve residents living in high-rise apartment buildings and guests at two hotels under construction across the street. The streetscape improvements extend from Northern Boulevard to 21st Street and include crosswalks, bike paths, sidewalks, a pedestrian walkway, and a 1.5 acre park with nearly 500 trees.
The proposal to create a new Metro-North rail spur in the eastern section of The Bronx, which Gov. Andrew Cuomo highlighted in his State of the State address, would give residents living in the eastern part of the borough easy access to jobs up and down the New Haven line. The NY Times examined the impact a new station in Co-op City would have on the 50,000 residents living there who currently experience longer commutes by taking express buses or local buses to the subway.
United American Land Co. is renovating a 123-year-old landmarked building on Fulton Street for residential use, making it the first apartment building on downtown Brooklyn’s bustling retail corridor in decades. The four-story, 123-year old property at 505 Fulton Street will feature a common roof deck, atrium, and 120 luxury lofts that are scheduled to be available late this year. TJ Maxx plans to move into the ground floor.