Nine Takeaways from Ariel Property Advisors’ Coffee & Cap Rates Event

Multifamily sales are down and demand for industrial is up in New York City, according to a 2019 year-end sales report highlighted by commercial real estate services firm Ariel Property Advisors.

Around 150 professionals in the commercial real estate industry attended Ariel Property Advisor’s semi-annual Coffee & Cap Rates meeting at the Club 101 in New York City on Thursday. Shimon Shkury, president of Ariel Property Advisors, led the meeting with a market insights presentation based on Ariel’s latest research and analysis of key industry trends and analyses. Here are the main takeaways from the event:

1. New York City experienced $6.91 billion worth of multifamily investment sales activity in 2019, comprised of 290 separate transactions and 451 buildings changing hands. When compared to 2018, all metrics show declines. Dollar volume dropped by 40 percent, transactions dropped by 36 percent and the number of buildings sold dropped by 47 percent.
2. New York City multifamily dollar volume has not been this low since 2011. Transaction number has dipped below the 300 benchmark since Ariel started tracking the data in 2010.
3. In Manhattan, both price per sq. ft. and price per apartment unit increased, while cap rates decreased. These statistics reflect the fact that more than 60 percent of the units that traded in Manhattan were unregulated.
4. The office market around the Grand Central area in Midtown will be a market to watch, according Tyrone Barnes, vice president of Taconic Investment Partners LLC, a real estate developer in based New York City.
5. New York’s industrial sector is doing “very well,” says Shkury, especially in the Bronx. The industrial, warehouse and storage asset classes collectively recorded a 10-year high in dollar and transaction volume in the borough.
6. The “retail [sector] has to reinvent itself,” according to Shkury, but the sentiment at the event was that high street urban retail is best positioned to survive.
7. Investors may still be bullish on well-located retail in Brooklyn moving into 2020, despite the state of the retail sector overall. The final three months of 2019 saw three deals in the retail space in the borough that were the largest commercial sales in Brooklyn. Total dollar volume reached just under $794 million in 2019, a 56 percent increase from 2018.
8. Last mile logistics have had a significant impact on the commercial real estate market in Queens. The number of industrial transactions in Queens increased by 7 percent year-over-year, while dollar volume grew by 56 percent.
9. According to Shkury, commercial real estate activity will likely slow down as we get nearer to the 2020 elections. Still, transaction volumes should stay around the same level as last year. One hitch is that uncertainty around rent regulation could also “significantly” affect the multifamily investment sales market, with all volume metrics trending down. Expect repricing of rent- controlled multifamily properties, with cap rates trending up.