NEW YORK CITY-Even in the wake of a boom in 2012, multifamily is poised to grow, according to a group of industry experts on Wednesday at the BuildingsNY conference, which was held at the Jacob R. Javits Convention Center. A host of factors, including continuing low interest rates and steadily increasing demand, promise to keep the market thriving, they said.
“Apartment sales will remain healthy throughout the year, without major changes in prices or rates,” said Peter Von Der Ahe, first VP, investments, Marcus & Millichap. “Neither inflation or rising interest rates are a concern before we have real wage growth nationally, he asserted. “As long as economies worldwide remain stressed, treasury yields will decrease, keeping interest rates low.”
The city also is benefiting both from a fairly healthy area recovery as well as the slower economic turnaround happening elsewhere in the nation, Von Der Ahe said. “We have a strong local economy and we're benefiting from the stimulus being given by the government in the form of low interest rates, so there's a favorable environment for investing.”
Just how favorable? “Rents are up 13.6% in the first quarter over Q1 2012, and we're expecting about a 5.2% increase for the year.”
Other industry players and observers also are optimistic based on Q1 activity. “In 2012, multifamily buildings represented about 30% of total dollar volume of sales but they were about half of all properties transacted,” said Robert Shapiro, first VP of sales, Massey Knakal Realty Services. “For multifamily buildings, transactional turnover—or the percentage of properties that sold out of the total stock—was 1.4%. While that was a significant decrease from the 2.5% transactional turnover in Q4 2012, I think the market was just digesting all of the transactions that took place in Q4 2012,” he said. Investors rushed to get deals done at the end of last year to avoid tax issues this year.”
Demand remains healthy in many pockets of the city but, in particular, Manhattan and Brooklyn continue to be white-hot, said Andrew Barrocas, CEO, MNS Properties. “A lot of industries, and entrepreneurs, are moving to Downtown Brooklyn,” he stated. “I see that area continuing to grow. In Manhattan, we're sitting in the next big area for renters [the Javits Center is on 34th Street and 11th Avenue]. The Related Companies' project here,” he said, referring to Hudson Yards, “is going to go for $90 a foot.
“You'll see rents grow in upper Manhattan too,” Barrocas continued, “and Greenpoint is something to watch. There are some incredible projects happening on the waterfront there.” His optimism carried through to an overall assessment. “I do anticipate a lot of inventory coming in the next 12 to 24 months, and people will be surprised by the rates at which that gets absorbed,” Barrocas asserted. “We're not in a bubble, I think we're just in the beginning.”
As for who's doing the buying, “institutional money is dipping its toe in the water,” said Shapiro. “Institutional investors will carry us forward,” added Von Der Ahe.
Still, the good times can't last forever, cautioned Jeff Farkas, chairman, CEO and principal executive officer, Farkas Management. “How much lower can interest rates go?” he asked. “Plus there will be increased operating and revenue expenses,” he said. “Let the buyer beware.”
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
