This didn’t seem like that much of a possibility in the recent past, but the multifamily sector of commercial real estate in Manhattan is facing a bit of a slowdown, albeit CRE professionals in most other major cities aren’t going to feel too sorry for this dip in fundamentals.
Though apartment vacancy rates rose year over year in February, they are still at an extremely tight 2.44 percent, compared to 2.31 percent during the same period in 2016, according to Douglas Elliman, in its most recent market report. Rental price per square foot also dropped 1.9 percent from the same year-ago period, sitting at $64.59.
The most problematic statistic in the Elliman report, though, is that the number of new leases signed fell by just below 28 percent. Supply on the market is on the rise as well, with listing inventory increasing 11.7 percent from the previous period in 2016, the seventeenth month in a row that has experienced a jump. As a result, landlords are offering more concessions to prospective tenants, hitting record highs over the last few months.
On the Manhattan multifamily transaction side, there have been some bumps in the road lately as well, says a report by Ariel Property Advisors. In its report on February’s results, the firm only tracked five building purchases in the entire borough, while the city saw overall sales-value volume dive 33 percent from January.
Unfortunately, this is not just a one-shot trend. Between September 2016 and February, there was just below $2.5 billion in apartment-building transactions. During that same span the year before, just below $8.5 billion of assets traded. Apartment-building sales are at their lowest since October 2011, said Ariel. The only borough that fared well during the month was The Bronx, with a 66 percent jump, hitting $95.1 million.
Brokerage firm Brown Harris Stevens had a more upbeat outlook on Manhattan multifamily. The outfit said that the average sales price for an apartment in the borough during the first quarter hit $2.2 million, an all-time high. Apartment-sales in new buildings reported averaged just over $4.3 million, a 15-percent jump over 2016’s first quarter.
Manhattan is at the core of trophy cities globally. There is still strong investor appetite from foreign funds, it is the economic capitol of the world and a huge tourist and shopping draw. The multifamily market, though by no means struggling, was bound to cool off for a bit, but with a strong overall economy another boom could happen at any time.