SHANAHAN'S TAKE

Multifamily’s terrific across the US, but there’s particular pressure in Manhattan for homeownership, CBRE investment guru Bill Shanahan tells us. Couple that with a younger workforce in areas like Silicon Alley and Wall Street (who aren’t buyers) and you’ve gotvery low vacancy—some submarkets are at nearly 1% or 2%. There haven't been a lot of deliveries either, so supply is constrained; only21,000 new rental units will be added to the inventory over the next five years.
The investment side has prime rentals ($2,500/month and up) and workforce housing. Bill's team recently brokered the sale of The Corner at 200 W 72nd St (above), which sold for $1M per unit, or $1,000/SF. They also sold two portfolios in the outer boroughs consisting of 15 buildings that only went for $140k per unit. But on both sides, there’s not enough product to satisfy investors, from institutional capital to family-dominated businesses. Add to that more new domestic funds and players returning to the market, like GID Investment Managers, UDR, and TIAA-CREF. (Reminds us of that Black Friday line for the cheap Xbox. We're still rinsing our eyes.)
Expect this market to continue through 2012, Bill says. Investors still want in, especially while the stock market is a roller coaster. Rental rates have already recovered to their pre-Lehman highs (can we agree on the abbreviations B.L. and A.L?); Q3 multifamily effective rents per unit surpassed the previous high reached in Q4 ’08 ($3,662). And rents are predicted to increase at an annualized average rate of 3.6% over the next five years. Freddie and Fannieare still opening their wallets, and low mortgage rates aren’t expected to run away from us either, he points out.

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Related Topics: Bill Shanahan , Silicon Alley , The Corner
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