4 Drivers of NY's Multifamily Bull Run
The multifamily market’s on a historic run of bullish conditions. JDS Development Group founding partner Michael Stern and Ariel Property Advisors founder and president Shimon Shkury point to four things that are fueling it. They’ll both be speaking at our 6th annual NYC Multifamily Summit on March 26 at New World Stage.
1. Big Job Growth
Shimon points out that NYC added 116,000 new jobs between January '14 and January this year. And that number reflects accelerating growth; it’s 2.9% more jobs added than the year prior, contributing to the tight inventory in the rental market and pushing up rents and multifamily pricing. Most of the growth is in the TAMI (tech, advertising, media and information) fields, which means a lot of young folks with some money to spend.
2. Growth in the Boroughs
Downtown Brooklyn, where Michael says JDS has a roughly 350-unit ground-up rental project in the works, has about double the number of rental units in the pipeline right now as were built there since a 2004 rezoning. The appeal of living in the boroughs only grows when big projects like the Brooklyn Navy Yard and Industry City mean more folks can work there, too. Ariel’s selling a five-building multifamily and mixed-use portfolio in Bushwick with an asking price of $17.5M. And Shimon says his firm brokered about $250M in transactions in the Bronx last year and recently sold a 17-building, 676-unit portfolio in the borough for $85.5M. He expects market-rate rental housing to take off along the Harlem River, where the Chetrit Group and Somerset Partners have a residential project in the works. And if four proposed new Metro North stations come to the eastern part of the borough in the coming years, Shimon says development's likely to follow.
3. Transit System Growing
It’s not just Metro North, of course. Michael says that for investors willing to play a longer game, acquisitions along Second Avenue, where we keep being told there’s a subway being built, will pay off. He pegs the Upper East Side as one of the most inexpensive established neighborhoods in Manhattan, and says once the new subway line opens, it may well shed that title. He says we can also expect an expanding 7 line to add value to an exploding far West Side as projects like Hudson Yards come on line.
4. Ultra-Luxe Market Has Buyers
Dune Real Estate Partners’ 56 Leonard saw a price hike of almost a third on its $35M penthouse over the last two years. Some even more jaw-dropping figures on luxe apartments have hit the market of late, like the $150M ask for a triplex penthouse in the Sony Building. Much has been made of foreign buyers driving demand and buying smaller units as safe havens for their cash, but Michael says much of the demand at that level is domestic. Sales start late in Q2 '15 on JDS and PMG's 95-story 111 W 57th St (shown above).