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NYC Apartment Sales Market Roars Back To Life

Interest rates haven't come down yet, but New York City’s multifamily sales market is turning a corner as developers and investors feel more confident in the city's political landscape. 


Transaction activity for multifamily development sites in the five boroughs dropped dramatically in late 2023 and early this year but has since rebounded, with a serious uptick in deal-making in the last month.

A wave of activity in June in particular has pushed sales of multifamily properties to around $2.6B for the second quarter, according to data provided to Bisnow by Ariel Property Advisors. That is roughly triple the transaction volume from the first three months of 2024.

With Albany's April passage of a new housing deal and Mayor Eric Adams’ City of Yes plan inching toward the finish line, deal volume on development sites and for existing buildings is on the rise.

“There's a plethora of opportunities in many different New York City submarkets that are now looking for financing,” said Daniel Ridloff, managing director for real estate credit at Scale Lending, the financing arm of Slate Property Group. “All these projects that were shelved are now off the shelf.”

Developers and owners have blamed the lack of sales activity on high interest rates, the impact of the Housing Stability and Tenant Protection Act of 2019 on the values of rent-stabilized properties, and political angst over good cause eviction.

In the second quarter of 2023, there were $3.1B of multifamily sales in New York City, according to Ariel data. That figure plummeted to $646M in Q4 before rising slightly in the first quarter to $858M. Big deals in June — like Breaking Ground's $172M Upper East Side buy and two acquisitions by Fetner Properties — pushed quarterly volume up by roughly 201%. 

The state's budget deal this spring has created more certainty for lenders, Helen Hwang, head of institutional investment sales at Meridian Capital Group, told Bisnow.

“Probably the biggest development in the market has been Good Cause Eviction, not because the law was passed, but because there is now some clarity on what it looks like,” she wrote in an email. “Investors now understand how to underwrite deals.”

Players in the multifamily industry told Bisnow they are seeing more interest in development site deals, owing particularly to two items: an extension running through to 2031 for projects that had already been granted the now-expired 421-a tax break and a successor program to the 421-a program known as 485-x.

Developers filed permits for just 15,500 apartment units in 2023, the fewest on record since 2016, Bloomberg reported. This year, volumes have continued to sink: Only 36 multifamily building permits were filed in May. But more development opportunities are already coming up, especially on sites with a 421-a extension, said Justin Pelsinger, chief operating officer at Charney Cos. 

“We've already seen an uptick in broker volume of people trying to sell those sites,” he said. “Maybe the owner of the site never was intending to build it themselves because they didn't have the capability, or maybe things have just waited so long that they really need to dispose of the asset.”

Before the recent uptick, much of the money in the market came from bargain seekers not necessarily looking to build, Ariel partner Victor Sozio said.

“There definitely was some activity from buyers that were looking to land bank and opportunities where they could buy and acquire an asset at a low enough basis,” he said.

The new 485-x abatement, which could unlock the development potential of sites that aren't eligible for the 421-a extension, isn't looked at with the same level of excitement among deal-makers.

One factor is the new labor requirements, Ridloff said. According to his calculations, the abatement results in a prevailing wage agreement of $70 per hour for labor alone at sites in Mott Haven, Long Island City and parts of Brooklyn.

“It makes it challenging in certain submarkets, even with the tax abatement, to make the project pencil out as well as the old 421-a did,” he said.

Developers are also unwilling to act on 485-x because of the details they don’t yet have, Pelsinger said.

“We're not focused so much on 485-x, I would say, until that whole thing has been unpacked and the knowledge base about the program is there,” he said. “People are still in a bit of a learning phase about the program.”

But Hwang said that in the past month, the new abatement has started to generate more activity. 

“The new 485-x program has already reinvigorated interest in rental sites, most of which didn’t previously work without a tax exemption,” Hwang said. “There is a good amount of positive buzz around City of Yes, and any measures that increase potential density will certainly help those actively pursuing rental development opportunities.”

UPDATE, JULY 8, 6 P.M. ET: This story originally used preliminary Q2 figures from Ariel Property Advisors and has been updated with finalized figures.