+ Ryan Serhant Weighs In on COVID-19 Crisis & Current State of NYC Real Estate
- NYC sales volume leaps 39% Y-o-Y, totals $1.9 billion in Q1.
- Sales activity remains unchanged, but number of buildings sold jumps 20%.
- Manhattan sales volume spikes 114% Y-o-Y to nearly $1 billion.
- Brooklyn prices reach highest figures in four years, sales activity gains 18% Y-o-Y.
- Price per unit drops 23% Y-o-Y in Queens as metrics contract across the board.
- Bronx sales volume and activity halved, but price per square foot ticks up 12% Y-o-Y.
Undoubtedly, 2019 was a year of turmoil for the NYC multifamily market, with sweeping legislative changes resulting in significant market fluctuations. So, after a year of tectonic shifts for the industry, we were curious to see how the multifamily market kicked off 2020.
We analyzed all arm’s length transactions recorded in the first quarter (Q1) in the boroughs of Manhattan, Brooklyn, the Bronx and Queens. The data showed clear positive trends in key metrics such as total sales volume, unit volume and number of buildings sold. Notably, Q1 metrics for the multifamily industry have yet to reflect the effects of the pandemic, owing at least partly to the usual delay between the sale of a commercial building and the actual registration of the sale.
But, of course, we couldn’t ignore the strong influence that the COVID-19 pandemic has already had and will continue to have in New York. So, for insight into how the NYC real estate market in general is reacting to the situation on the ground, we reached out to one of the most high-profile real estate professionals in the city: Ryan Serhant, BRAVO TV Star of “Million Dollar Listing New York” and Principal Broker of Nest Seekers International / The Serhant Team.
The New York City market has come to a standstill. No one has ever experienced anything like this before, so everyone just stopped. We aren’t seeing that many people cancel contracts or pull out of deals though, which is good. It’s more of a “let’s wait-and-see approach. Additionally, we aren’t seeing rent concessions in the way that so many were predicting, but we are seeing owners offer flexibility on a tenant-by-tenant basis.Ryan Serhant, Nest Seekers International Principle Broker & Million Dollar Listing star
NYC Sales Activity Remains Unchanged, Number of Buildings Sold Jumps 20% Y-o-Y
Circling back to the multifamily market, Q1’s performance in 2020 was particularly important after the upheaval that took place during the previous year. After all, by the time 2019 was over, the NYC multifamily market had undergone a sizeable contraction— sales activity shrunk by 32% and the yearly unit volume was nearly halved. Furthermore, despite sustained price growth, the drop in transactional activity meant that the 2019 total sales volume for the four boroughs came in 41% below 2018 figures.
However, Q1 2020 presented a markedly different picture with $1.9 billion in total sales volume — up a significant 39% over Q1 2019. However, because Q1 2019’s sales volume was 48% below Q1 2018, the first three months of this year still came in $747 million below the figures reached two years ago.
Meanwhile, sales activity across the city remained unchanged compared to year-ago levels, with 217 deals closed. A 0% change might not seem like a positive evolution, but Q1 2019 registered 28% fewer transactions than Q1 2018 — which also trended negatively with 7% fewer sales than Q1 2017. Year-to-date, sales activity was most dynamic in January with 91 deals closed, while February proved strongest for sales growth, registering 20% more deals year-over-year.
Although sales activity remained unchanged year-over-year, the first quarter’s 217 transactions comprised 282 buildings — 20% more than Q1 2019, which had logged 32% fewer building sales than Q1 2018. Moreover, the latter had also trended negatively, with 8% fewer buildings trading hands then as compared to Q1 2017.
That increase in the number of buildings traded also lifted unit volume metrics — up to 5,268 units trading hands between January and March, 13% more than in early 2019. However, Q1 2020 had a much more compact unit volume than both Q1 2018 and Q1 2017.Year-to-date, January leads in sales volume with 2,479 units traded, while February was the strongest month for growth, coming in at a whopping 89% over February 2019.
Pricing metrics for the four boroughs were weaker, though, with average price per square foot stabilizing at $445 for a 5% year-over-year contraction. March was the strongest month for the quarter, hitting $479/sq. ft — although that figure was 16% below March 2019. However, January was the strongest month for growth with a 4% Y-o-Y uptick.
Unlike the average price per square foot, the average price per unit did register positive growth in Q1, albeit a modest 3%. Consequently, the average price per unit for NYC multifamily stabilized at $394,968. Here, too, March was the strongest month in terms of absolute pricing, reaching $492,772 per unit, with January leading in pricing growth at 16% Y-o-Y.
As for the city’s top deals, the five most expensive transactions in the city totaled $994 million, making up 52% of the quarter’s entire sales volume. In fact, 20% of the entire sales volume of Q1 was represented by the $380.6 million sale of the Instrata NoMad luxury apartments at 7 East 28th Street in Manhattan’s NoMad.
The quarter’s second-priciest deal was a multi-borough, 10-property deal worth $162.7 million. Sold in late December 2019, the sale comprising multifamily properties in Manhattan, Queens and Brooklyn was recorded in early January. At $137.75 million, the sale of 250 North 10 Street in Brooklyn was the city’s third-most expensive, followed by the $83.76 million sale of 123 Hope Street, also in Brooklyn. The $66.25 million sale of 340 East 51st Street in Manhattan — to a partnership including former New York Yankee Alex Rodriguez — was the fifth-most expensive deal in the four boroughs.
Manhattan Sales Volume Surges 114% Y-o-Y, Reaches Nearly $1 Billion
For Manhattan, the city’s top deal was also the borough’s most expensive deal of the quarter. As such, 7 East 28th Street’s sale represented 39% of Manhattan’s Q1 sales volume, which totaled $979 million. While that figure was lower than the $1.48 billion recorded in Q1 2018, it did represent a whopping 114% Y-o-Y boom over the $457 million recorded in Q1 2019, which had plummeted 70%.
The borough’s second-most expensive transaction was the $66.25 million sale of 340 East 51st Street also the fifth-priciest Q1 deal in NYC. Formerly known as The Allen House, the 114-unit Midtown property has been rebranded Stonehenge 51 by the new ownership, which includes Stonehenge NYC, Modlin Group and Alex Rodriguez’s A-Rod Corp. That transaction represented 3% of the city’s total sales volume for the first quarter.
Manhattan’s third-most expensive deal was the $35.67 million sale of 159 Bleecker Street in Greenwich Village, bringing the combined value of the borough’s top three deals to 49% of Q1’s total sales volume.
Of the $979 million in multifamily sales registered in Q1, $571 million — or 58% — were registered in February. March, however, was the weakest month in at least 39 consecutive months, registering only $132 million in sales. This may be the first sign of the effect of COVID-19, but it’s also worth noting that March 2019 was the weakest month of that year, as well, with a sales volume of only $136 million.
Meanwhile, sales activity was on the upswing in Q1, too, gaining 20% Y-o-Y for a total of 61 unique deals, 30 of which closed in January. First-quarter pricing trends, though, were negative for the borough, with the average price per unit contracting 20% Y-o-Y, while the average price per square foot dropped 31%. As a result, Manhattan’s average of $544,370 per unit is the lowest Q1 price in at least four years, as is the borough’s $602/sq. ft average.
Brooklyn Prices Reach Highest Figures in 4 Years, Sales Activity Gains 18% Y-o-Y
Brooklyn Q1 metrics were up across the board, both in terms of transactional activity, as well as pricing. In fact, the average price per square foot gained 12% Y-o-Y, reaching $470, while the average price per unit jumped 23% Y-o-Y to $420,718. Both prices represent the highest Q1 figures for the borough in at least four years.
Similarly, sales activity grew 18% Y-o-Y, with 91 sales registered in the first three months of the year — the highest figure across the four boroughs. Of these, 40 sales totaling $336 million were registered in January, making it the strongest month both in terms of sales activity, as well as sales volume.
While Brooklyn’s Q1 sales volume didn’t grow quite as vertically as Manhattan’s, the borough still experienced an impressive 40% Y-o-Y surge, registering $639 million in multifamily sales — its highest Q1 figure in four years.
Of that total sales volume, 38% was represented by the top three deals of the quarter. At $137.75 million, 250 North 10 Street was the borough’s most expensive multifamily deal, as well as the city’s third-most expensive. It was followed by fellow Williamsburg asset 123 Hope Street at $83.76 million, the city’s fourth-priciest and Brooklyn’s second-most expensive transaction. The 40-unit 83 Clifton Place in Clinton Hill rounded out the borough’s top three with its $22.9 million sale price.
Bronx Sales Volume & Activity Halved; Price Per Square Foot Ticks Up 12% Y-o-Y
Conversely, the Bronx multifamily market presented a starkly different picture from that of Manhattan and Brooklyn. Here, sales volume crashed 53% Y-o-Y, totaling $123 million for the lowest Q1 figure in four years. Nonetheless, February was the strongest month for the Bronx, registering $74 million in sales across 13 unique transactions, including the borough’s top two deals.
Specifically, 28% of the Bronx’s Q1 sales volume was represented by the borough’s top three multifamily deals. The most expensive Q1 multifamily transaction in the Bronx was the $13.76 million sale of 1515 Grand Concourse in Mount Eden, followed by 1135 Boynton Avenue in Soundview at $10.9 million and the 61-unit 226 West 242nd Street in Kingsbridge at $9.69 million.
Overall, the Bronx registered only 31 multifamily sales in Q1 for a 38% Y-o-Y contraction. Moreover, this was also the slowest first quarter in at least four years, as Q1 2019 registered a 21% Y-o-Y contraction and Q1 2018 was also down 9% Y-o-Y. As a result, the first three months of 2020 experienced less than half of the transactional activity recorded in Q1 2017, which had 69 sales.
Fortunately, the Bronx did somewhat better in pricing metrics. The average price per unit for Q1 was $175,296, down a negligible 1% Y-o-Y. This marked the lowest price per unit across the four boroughs, similar to the Bronx’s average price per square foot, which is typical for the NYC multifamily market. However, at $197, the first quarter’s average price per square foot was up 12% Y-o-Y, reaching its highest point in at least four years.
Price Per Unit Drops 23% Y-o-Y in Queens as Metrics Contract Across the Board
In the Queens multifamily market, all four key indicators trended negative. In particular, the borough’s average price per square foot contracted 19% Y-o-Y for a Q1 value of $324 per square foot. The borough’s average price per unit dropped at an even sharper rate of 23%, stabilizing at $258,292 — the lowest level in three years.
What’s more, that price drop was compounded by a 13% Y-o-Y contraction in transactional activity to bring the overall Q1 sales volume down 18% below Q1 2019. Along the same lines, the 34 multifamily sales registered in Queens in the first three months of 2020 totaled $157 million — the lowest first quarter sales volume since 2017.
Of the $157 million in sales that Queens registered in the first three months of the year, $101 million — representing 64% — were registered in January, as were 15 of the quarter’s 34 sales, making this the strongest Q1 month for the borough by far.
Even so, Queens’ most expensive multifamily deals were registered in March, with a 13-building portfolio on Beach 65th Street in Arverne coming in as the priciest at $13.95 million. Queens’ second-most expensive multifamily sale was 37-43 80th Street in Jackson Heights — a 27-unit building that changed hands for $6.27 million — followed by the $5.85 million purchase of 118-22 Atlantic Avenue in Richmond Hill.
At a combined value of $26 million, Queens’ top three transactions represented only 16% of the borough’s Q1 sales volume. This was the lowest share in the city and a far cry from the 49% that Manhattan’s top three deals represented in that borough’s sales volume.
“Floor It onto the Open Road. That’s the Second Quarter.”
Stay lean.You must always operate as if there will be a recession tomorrow, and COVID-19 showed us that.
What the second quarter will look like for the multifamily industry — or the NYC real estate industry, in general — will depend on a variety of factors. For now, life in NYC remains on pause. So, what is the key for real estate professionals to weather the crisis in uncertain times? According to Ryan Serhant, it’s patience and planning.
Stay lean. Time and time again, we see market disrupters making waves with excess capital when the market is strong. But, when the market is weak, the only disruption those same companies are making is to the lives of the employees they have to fire. You must always operate as if there will be a recession tomorrow, and COVID-19 showed us that. The Dow sold off 10,000 points in two weeks. All of a sudden, the ‘that can never happen, so don’t worry’ scenario actually happened. Furthermore, the most productive workforces are the ones with the most capable people — not the most people. You weather the storm by having 10 people work with you who can do the job of 50, not 50 who do the job of 10 — and you’re seeing a lot of that pain right now.Ryan Serhant, Nest Seekers International Principle Broker & Million Dollar Listing star
As for his take on Q2 and when the outbreak will be brought under control, Serhant predicts that a lot of pent-up demand will suddenly be released back into the market.
The shelter-in-place mandates are like a traffic jam. We are all stuck on the highway in stalled traffic, wondering when the accident far down the road will be cleared. We know there’s an accident because that’s what our GPS says, and while we’re thankful we aren’t the ones in the accident, we are also frustrated because now we’re going to be late to our next appointment. And, what does everyone do when you finally drive past the accident? You drive by really slow, gawk, thank the Lord it wasn’t you, and then floor it onto the open road. That’s the second quarter.Ryan Serhant, Nest Seekers International Principle Broker & Million Dollar Listing star
For our Q1 2020 multifamily snapshot, we considered all multifamily building sales registered through deeds between January 1 and March 31 in 2017, 2018, 2019 and 2020, in the boroughs of Manhattan, Brooklyn, Queens and the Bronx. All sales were counted for the month they were registered in.
All deals between related parties were excluded, and all deals included in our report were verified to be arm’s length transactions. Properties with fewer than five units were also excluded, as were deals with sale prices less than $100,000.
The $13.95 million, 13-building sale on Beach 65th Street that ranked as the most expensive multifamily deal in Queens included the following properties: 301 Beach 65 Street, 303 Beach 65 Street, 305 Beach 65 Street, 307 Beach 65 Street, 309 Beach 65 Street, 311 Beach 65 Street, 317 Beach 65 Street, 319 Beach 65 Street, 321 Beach 65 Street, 323 Beach 65 Street, 325 Beach 65 Street, 327 Beach 65 Street and 329 Beach 65 Street.
The $162.7 million multi-borough portfolio sale that ranked as NYC’s second-most expensive Q1 transaction included the following properties:
- 213 Bennett Avenue, Washington Heights, Manhattan: $15 million
- 50 Overlook Terrace, Washington Heights, Manhattan: $13.6 million
- 106 Ft Washington Avenue, Washington Heights, Manhattan: $13.3 million
- 1625 Rockaway Parkway, Canarsie, Brooklyn: $25.3 million
- 170 North 5th Street, Williamsburg, Brooklyn: $11.2 million
- 25-21 31st Avenue, Old Astoria, Queens: $20.7 million
- 29-07 31st Avenue, Old Astoria, Queens, and 30-95 29th Street, Old Astoria, Queens: $18.9 million
- 25-74 33rd Street, South Astoria, Queens: $16.6 million
- 31-49 29th Street, South Astoria, Queens: $13.6 million
- 122-20 Ocean Promenade, Rockaway Park, Queens: $14.5 million