The Bronx
In the walk-up sector in the Bronx, there were $22 million of sales in 1Q11. There were 10 buildings sold, containing a total of 306 units. The cap rate here was one of the few to increase in 1Q11 over 2010, as the average rate increased to 9.6 percent from 8.04 percent last year. Interestingly, the price per unit increased from $73,000 to $79,000, and the price per square foot increased from $87 to an average of $93. Given the increase in cap rates in this sector, one can only conclude that buildings with higher average rents, or a significant percentage of free-market apartments, were selling in 1Q11 vs. 2010 activity.
In the elevator sector, there were approximately $39 million of sales. This total, if annualized, would be well below the $211 million of sales in this sector in 2010. There were five properties sold, with a total of 472 units. The cap rate here dropped from 7.93 percent to 7.07 percent. The GRM increased from 6.92 to 8.07. There was also similar positive movement in the average price per unit, which increased from $71,000 to $84,000, and the average price per square foot increased from $67 to $91 this year.
It is interesting to see how the walk-up sector and elevator sector are moving in different directions within this submarket. The movement could be attributed to having only one quarter of data, which can skew the numbers.
Queens
In the first quarter of the year, there were approximately $53 million of sales in the walk-up sector. At this pace, the sector would more than double the 2010 total. Eighteen buildings traded, containing a total of 409 units. The cap rate here dropped from 2010’s average of 7.75 percent to 6.3 percent. Interestingly, the GRM stayed about the same, moving to 9.33 this year from 9.41. The price per square foot and the price per unit both dropped slightly. While this movement is counterintuitive, it is likely that many of the properties that sold in Queens in the first quarter had very low average rents.
In the elevator sector, we saw $107 million of sales in 1Q11. This total, even without annualizing it, has already exceeded the 2010 total of $77 million. Seven buildings sold containing a total of 623 units. The average cap rate dropped from 6.03 to 5.17 this year, and the GRM increased significantly, rising from 9.8 in 2010 to 11.2 in 1Q11. The average price per unit also increased substantially, rising from $124,000 in 2010 to $164,000 this year.
Brooklyn
In the first quarter of this year, there were approximately $84 million in walk-up building sales in the Brooklyn submarket. There were 43 properties sold, with a total of 743 units. All three of these totals, if annualized, will far surpass 2010 levels. The cap rate here dropped from 7.1 percent last year to 6.2 percent this year, with the average GRM, surprisingly, dropping from over 10 to 8.18. The average price per square foot dropped slightly, from $172 to $156 in 1Q11.
In the elevator sector, there were $78 million of sales in 1Q11, which, if annualized, will be significantly in excess of last year’s $102 million. Eight elevator properties sold, containing a total of 494 units. The average cap rate here dropped from 7.09 percent in 2010 to 5.03 percent in 1Q11. The average GRM increased from 8.19 to 9.21. There was a significant increase in the price per unit, which climbed from $145,000 to $248,000.
While one quarter of data is not something we want to read too much into, it is apparent that the multifamily marketplace is trending positively. Generally, cap rates are compressing, GRMs are increasing and we are seeing increases in average price per unit and price per square foot.
It is important to note that even though we have broken down the analysis by submarket, the averages presented here are exactly that-averages-and within each submarket there are dozens of smaller markets all operating on their own. Therefore, within each submarket there can be a wide range of metrics, all of which are appropriate for that particular neighborhood. The data presented here is to simply show the general direction the market is headed and should not be used as a benchmark to calculate the value of any particular property.
The biggest concern for the multifamily sector is the status of rent regulation and how the market may be impacted by the form rent-regulation renewal takes this summer in Albany. There are several bills that have been passed by the State Senate that favor property owners and there are several bills passed by the State Assembly that favor tenants. How the renewal is implemented could have significant implications for the future of rent-regulated properties.
rknakal@masseyknakal.com
Robert Knakal is the chairman and founding partner of Massey Knakal Realty services and in his career has brokered the sale of more than 1,150 properties totaling over $7.4 billion in value.
