Corporate Expansion Boosts Outer Borough MF Development

J.D. Parker, SVP, regional manager, Marcus & Millichap

NEW YORK CITY—Worldwide corporate expansion is expected to fuel continued new multifamily development in Manhattan as well as a marked increase in new projects in the outer boroughs as well this year. Executives with Marcus & Millichap say that development activity certainly will spread to Brooklyn, as well as Queens, the Bronx and Staten Island. In the firm’s latest Multifamily Research Market Report on the New York City metro area, J.D. Parker , SVP, regional manager here says, “An expansionary mindset among the largest corporations in the world is driving the local economy, sponsoring a virtuous cycle of rising multifamily rental demand.” Absorption is at its highest rate of the current cycle, he adds, which is spurring builders to fast-track plans for their development projects. Parker estimates that deliveries in the New York metro region this year will triple last year’s levels. “While Manhattan will still receive the majority of new supply, Brooklyn is quickly gaining steam as renters seek out more affordable options along the East River in locales such as Williamsburg and Greenpoint,” Parker notes. “Meanwhile, real estate values have risen enough to support construction in Queens, the Bronx and Staten Island. Planned completions in the outer boroughs will surpass the prior peak as the outward shift gains more traction.” Marcus & Millichap predicts that developers will deliver more than 30,000 new apartments in 2016,  a dramatic increase from 2015′s 13,000 new unit output. Most of the new units delivered this year will be projects based in Manhattan and Brooklyn. The brokerage firm expects vacancies and rents to rise this year. The multifamily vacancy rate in Manhattan will rise 30 basis points from 2015 levels to 2%. Strong growth in net migration and new household formation will ensure sufficient tenant demand, which will fuel a projected increase of 2.5% in rents this year to $4,123 per month. In 2015, rents rose 4.0% from a year earlier. In terms of hot multifamily markets, Marcus & Millichap says  the Financial District and Lower East Side are outperforming with vacancy rates at 1.4% and 0.5%, respectively. Midtown was the only submarket in Manhattan that posted a rise in vacancy—up 50 basis points to 3.1% due to increased apartment construction. Brooklyn, meanwhile saw its multifamily vacancy rate fall 30 basis points to 3.5%, led by the strong waterfront markets of Greenpoint and Williamsburg.