Chris Waggoner Photography

4Q 2019

Block by Block

B6 Real Estate Advisors NYC Market Insights.

A comprehensive data analysis providing macro and micro market trends for NYC commercial real estate.

Chris Waggoner Photography

2019: Year in Review

2019 was a tumultuous year for the New York City investment sales market. There was Amazon’s derailed plan for its HQ2 in Long Island City, which was supposed to be a boon to Queens real estate. Then sweeping rent reform legislation from the state government brought concerns of larger upheaval within the multifamily sector.

With external factors potentially wreaking havoc, the investment sales market finished 2019 with a total dollar consideration of just under $34B — a decline of 7% from 2018 but a slight increase (+2%) from two years ago. Transaction volume, however, did produce fewer than 2,100 transactions for the first time since 2011.

Across New York City, several asset classes outperformed their 2018 results. The office sector saw a 25% increase in dollar volume and retail activity nearly doubled, signaling a thawing of that sector after a tough 2018. And industrial dollar volume rose to a record high, as we discussed in Q3.

Here’s a look at 2019, in a nutshell:

$33.7B

Dollar Volume

7% YoY

1,835

Transactions

33% YoY

$627

Price Per Square Foot

12% YoY

*Numbers shown are year-to-date, 1Q’19 - 4Q’19

4Q19 Update

The fourth quarter of 2019 saw 350 transactions worth $9.2B in activity across Manhattan, Northern Manhattan, Brooklyn, Bronx and Queens.

Here are our key takeaways from Q4:

Dollar volume in Q4 surpassed that of the second and third quarter. It was driven by a series of large transactions, which pushed the average sales price to its highest point since 2Q16.
Manhattan rounded out the year strong. Both dollar volume and transactions increased quarter-over-quarter.
Demand for industrial and mixed use properties dropped in Q4, despite both sectors performing well throughout the year.

MarketAdd up to five markets to the view below

Brooklyn

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Bedford Stuyvesant, BK

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All property types

Dollar Volume

Quarterly totals, 2009—2019

Dollar Volume

Expand

Transactions

Quarterly totals, 2009—2019

Transactions

Expand

Price per Square Foot

Quarterly mean $/SF, 2009—2019

Price per Square Foot

Expand

No data available

Mouseover a line to show values

From a dollar volume perspective, it was a strong quarter for Manhattan. Total volume grew by more than 20% quarter-over-quarter, topping $6.2B for the first time since 4Q17. The multifamily sector was a surprising benefactor, primarily due to the closing of The Roosevelt Landing Portfolio by L+M and Invesco in October.

Other markets were a different story. The number of transactions dropped quarter-over-quarter In Queens (86), Bronx (36), and Northern Manhattan (16). Brooklyn’s decline was particularly precipitous, where transactions slumped to their lowest level (150) since 1Q13.

Price per square foot reached $616 in Q4 across core asset types, just below the citywide average ($627) for 2019.

Looking Ahead: B6’s 2020 Predictions

So where’s the market headed in 2020? We asked members of our investment sales and capital advisory teams to give us their takes in a special report we published last week. In it, we answer questions like:

How much do we anticipate dollar volume, transactions, and cap rates rising this year?
Which borough is the one to watch for increased activity?
Will multifamily investors return to the market in 2020?

B6’s 2020 Predictions Report

Special Report

Methodology

All metrics presented in this report — Dollar Volume, Transactions, Price per Square Foot, and Price Per Buildable Square Foot — are based on closed sales that occurred before September 9, 2019. Only portfolios located within Manhattan, Brooklyn, Bronx, or Queens with a sale price of at least $1,000,000 were included in our calculations. We consider the divide between the Manhattan and Northern Manhattan markets to be 96th Street on the eastside and 110th Street on the westside. Data comes from Reonomy, RCA, ACRIS, NYC Open Data, and our own data repositories.

We used the following definitions to record the property type of each transacted building:

C1, C2, C4, C5, C9
D1, D2, D3, D5, D8, D9
K4 and all “S” classes (S0, S1, S2, S3, S4, S5, S9)
select “K” classes (K1, K2, K3, K5, K6, K9) / select “R” classes (R5, R7, R8, RK)
All “O” classes: (O1, O2, O3, O4, O5, O6, O7, O8, O9) and RB
All “E” classes (E1, E3, E4, E6, E7, E9), all “F” classes (F1, F2, F4, F5, F8, F9) and RW
G0, V0, V1, and other properties purchased for development

We excluded the following property types from our analysis altogether:

Disclaimer

B6 Real Estate Advisors, LLC © 2019. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice. It is the responsibility of the prospective purchaser to make an independent determination as to the condition of the property (or properties) in question and prospective purchasers cannot rely upon any representation made by B6 Real Estate Advisors, LLC or any personnel associated with B6 Real Estate Advisors, LLC.

Chris Waggoner Photography

3Q 2019

Block by Block

B6 Real Estate Advisors NYC Market Insights.

A comprehensive data analysis providing macro and micro market trends for NYC commercial real estate.

Chris Waggoner Photography

Market Update

As the new reality of stricter rent regulations becomes clear, the Investment Sales Market in New York City continues to underperform its historical trend of the last decade in both dollar volume and transactional volume. While an expected drop in multifamily sales has continued, it is clear investors across the city have begun to diversify their portfolios and reassess their investment theses to include smaller mixed-use assets as well as other non-traditional assets such as industrial.

Here are our key takeaways from Q3:

The office sector contributed $3.59B in total dollar volume in 3Q19 or 53% all volume in 3Q19
Northern Manhattan has been hit especially hard by the Rent Regulation law changes where the multifamily sector contributes 50% of its total transaction volume in a given year.
Mixed-use has contributed an all-time high (31%) of all transactions in 2019 thus far, compared to just 15% in 2009

The overall market continues to slow

The third quarter of 2019 saw 369 transactions worth $6.8B in activity across Manhattan, Northern Manhattan, Brooklyn, Bronx and Queens. This quarter is the lowest quarter since 354 transactions in 1Q13, while transaction velocity in 3Q19 is down 29% from 2Q19.

$23.9B

Dollar Volume

11% YoY

1404

Transactions

33% YoY

$635

Price Per Square Foot

13% YoY

*Numbers shown are year-to-date, 1Q’19 - 3Q’19

Of the $6.8B this quarter, the office sector represented $3.5B of the total transactions or just over half of the entire volume for the quarter. On an annualized basis we can expect roughly 2,100 transactions for $35B at year’s end. The 2,100 transactions would put the year inline with the output from 2012, while dollar volume has remained fairly consistent since 2017.

On a market level, Brooklyn recorded the majority of transactions for the quarter with 169 while Manhattan (65), The Bronx (36), Northern Manhattan (13) and Queens (88) rounded out the rest. The slow down in the market has been felt in specialized markets like Northern Manhattan where the changes in the multifamily market have had a pronounced effect.

“Despite a recent pull-back from investors in the rent-regulated multifamily asset class, last year’s rezoning of Inwood and the emergence of Opportunity Zones have created a silver lining for Northern Manhattan,'' says B6’s Director of Real Estate Investment Sales, Brian Whelan. “These changes have led to an uptick in investment demand for large scale value-add and ground-up projects, which should equate to positive market conditions going forward.”

Price per square foot ($634) for core asset types has fallen slightly from 2Q19 ($646), but is still on pace to be all-time high annually. Pricing for development sites in New York City remains strong and has continued to increase year over year.

On an asset level, mixed-use properties in the boroughs continue to be the outstanding performer with 114 transactions for the quarter citywide, while the office sector in Manhattan has performed well.

Explore other trends at the market, submarket, and property type level below.

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Brooklyn

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SubmarketAdd up to five submarkets to the view below

Bedford Stuyvesant, BK

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Show

All property types

Dollar Volume

Quarterly totals, 2009—2019

Dollar Volume

Expand

Transactions

Quarterly totals, 2009—2019

Transactions

Expand

Price per Square Foot

Quarterly mean $/SF, 2009—2019

Price per Square Foot

Expand

No data available

Mouseover a line to show values

Spotlight: What’s Driving Industrial’s Rise?

Even as the overall New York investment market cools, investors are still finding opportunities in select asset classes. Industrial properties, in particular, have been moving at record pace in 2019, with roughly $2.4B projected to sell by year’s end. Through Q3, industrial dollar volume is up over 145% since 2016.

Industrial’s sudden rise is evidence that the ambitions of online retailers are having a dramatic impact on the investment market. Amazon and Walmart, for instance, have both opened sprawling fulfillment centers in NYC recently to cut down on delivery times. Other companies are following suit, looking for space close to urban cores from which they can reach consumers quickly.

Industrial purchases were concentrated in Brooklyn in Q3, with neighborhoods like Flatbush and Bed-Stuy leading the way. Though demand for smaller warehouses has grown across the country, sales prices in NYC certainly aren’t shrinking; the average industrial deal topped $12M in Q3, the highest ever.

Follow the rise of Industrial

NYC industrial transactions in

Play

Transactions

total

Dollar Volume

total

Start

Industrial Transactions Sized by Sales Price

$10M

$100M

$200M

$300M

Industrial Transactions Sized by Sales Price

While the industrial market is riding a wave of strong demand, the outlook for other asset types isn’t nearly as rosy. Chief among the laggards is retail, which has experienced a noticeable decline since its 2014 high. Even as the retail market rebounds slightly in 2019, dollar volume is on pace to drop 64% this year relative to 2012.

The growth of e-commerce has contributed to the softness in retail, as consumers trade shopping in store windows for browser windows. But the story runs deeper. There’s also just an overabundance of stores; nationwide, the U.S. now has five times more shopping space per capita than the U.K. and 10 times more than Germany. In that context, a dip in retail investment seems inevitable.

Follow the fall of Retail

NYC retail transactions in

Play

Transactions

total

Dollar Volume

total

Start

Retail Transactions Sized by Sales Price

What Firms Are Buying up Industrial?

As industrial booms and retail wanes, that begs the question: which firms are driving the shift in preferred asset classes? B6 analyzed the portfolios of the 500 largest property holders in New York to find out.

Many equity funds and public REITs have been placing big bets on industrial over the last 24 months. One of the most noteworthy entrants is Blackstone, now the sixth largest property holder in NYC according to data from RCA. Last year, they made waves by purchasing Gramercy Trust, an industrial real estate investment trust, for $7.6B. Then in June, they completed one of the largest industrial real estate transactions in history with GLP, snatching up a staggering $18.7 billion in warehouse space.

“Logistics is our highest conviction global investment theme today,” Ken Caplan, Global Co-Head of Blackstone Real Estate said in a press release announcing the GLP deal.

Blackstone’s buying spree has caused its industrial portfolio in New York City to grow eightfold over the last 24 months. Follow the chart below to see what the company purchased, and what it sold off.

Blackstone Has Been Buying Industrial at an Unprecedented Pace

Change in Holdings for Blackstone in NYC Metro Area, last 24 months

Dispositions

last 24 months

Blackstone’s industrial portfolio was limited in October of 2017, with only 5 total assets.

Office

13 Assets

Retail

9 Assets

Office

16 Assets

Industrial

5 Assets

October 2017

Total Assets Held

Retail

6 Assets

Apartment

24 Assets

Industrial

40 Assets

Hotel

11 Assets

October 2019

Total Assets Held

Apartment

26 Assets

Hotel

8 Assets

Over the last two years, Blackstone has acquired a significant

amount of assets.

A large majority of their acquisitions were industrial properties, as they hold 40 as of October 2019.

Acquisitions

last 24 months

Blackstone’s industrial portfolio was limited in September of 2017, with only 5 total assets.

Dispositions

last 24 months

Office

13 Assets

Retail

9 Assets

Office

16 Assets

Industrial

5 Assets

October 2017

Total Assets Held

Retail

6 Assets

Apartment

24 Assets

Industrial

40 Assets

Hotel

11 Assets

October 2019

Total Assets Held

Apartment

26 Assets

Hotel

8 Assets

Over the last two years, Blackstone has acquired a significant

amount of assets.

A large majority of their acquisitions were industrial properties, as they hold 40 as of September 2019.

Acquisitions

last 24 months

Blackstone’s industrial portfolio was limited in September of 2017, with only 5 total assets.

Dispositions

last 24 months

October 2017

Total Assets Held

Office

13 Assets

Retail

9 Assets

Office

16 Assets

Industrial

5 Assets

Retail

6 Assets

Apartment

24 Assets

October 2019

Total Assets Held

Industrial

40 Assets

Hotel

11 Assets

Apartment

26 Assets

Hotel

8 Assets

Acquisitions

last 24 months

Over the last two years, Blackstone has acquired a significant

amount of assets.

A large majority of their acquisitions were industrial properties, as they hold 40 as of September 2019.

Blackstone’s industrial portfolio was limited in September of 2017, with only 5 total assets.

Dispositions

last 24 months

Office

Oct 2017 Total

Retail

Industrial

Office

Apartment

Retail

Oct 2019 Total

Hotel

Industrial

Apartment

Hotel

Acquisitions

last 24 months

Over the last two years, Blackstone has acquired a significant amount of assets.

A large majority of their acquisitions were industrial properties, as they hold 40 as of September 2019.

Despite a slew of splashy acquisitions, Blackstone has been just the third largest acquirer of industrial properties since October 2017. Colony Capital and Cammeby’s have both grabbed more over the same timeframe. But Blackstone will soon take Colony Capital’s spot at the top -- they plan to acquire Colony Capital’s industrial holdings for $5.9B by the end of next quarter.

Meanwhile, NYC’s largest property owners haven’t been nearly as eager to invest in the retail space. In the last 12 months, they’ve disposed of more retail ($2.8B worth) than they’ve acquired ($2.1B).

The diagrams below shows the acquisition and disposition history of firms with the fifteen highest increases in industrial properties over the last 24 months. Use the toggles to see which firms are scooping up, or offloading, other asset types in New York.

Industrial’s Largest Investors

Change in Holdings for 500 Largest Property Owners in NYC Metro Area, last 24 months

Sort firms by

in

assets

Office Retail Industrial Apartment Hotel

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Methodology

We used the following definitions to record the property type of each transacted building:

C1, C2, C4, C5, C9
D1, D2, D3, D5, D8, D9
K4 and all “S” classes (S0, S1, S2, S3, S4, S5, S9)
select “K” classes (K1, K2, K3, K5, K6, K9) / select “R” classes (R5, R7, R8, RK)
All “O” classes: (O1, O2, O3, O4, O5, O6, O7, O8, O9) and RB
All “E” classes (E1, E3, E4, E6, E7, E9), all “F” classes (F1, F2, F4, F5, F8, F9) and RW
G0, V0, V1, and other properties purchased for development

We excluded the following property types from our analysis altogether:

Co-Op/Condo Buildings: C classes (C6, C8), D classes (D0, D4), R classes (R0, RM)
Residential Buildings: All “A” classes (A0, A1, A2, A3, A4, A5, A6, A7, A8, A9), all “B” classes (B1,B2,B3,B9), and select “C” classes (C0, C3)

To analyze the purchases of individual firms, we pulled acquisition and disposition reports for the top 500 property owners in the NYC metro area from RCA. We deduced the composition of each firm’s portfolio on October 1, 2017 by taking their present number of holdings in an asset class on September 30, 2019, then subtracting the number of properties they acquired in the past 24 months and adding the number they disposed of.

Disclaimer

Chris Waggoner Photography

1H 2019

Block by Block

B6 Real Estate Advisors NYC Market Insights.

A comprehensive data analysis providing macro and micro market trends for NYC commercial real estate.

Chris Waggoner Photography

Market Update

The investment sales market in New York City continued its sluggish performance through the second quarter of 2019. Dollar volume and transactions both decreased year-over-year, in part due to weakening demand for rent stabilized multifamily assets across the city. B6 anticipates a broader decline in transactional velocity in the second half of 2019, as the market reacts to the new rent regulation handed down from Albany in June.

As the multifamily sector struggles, market signals indicate investors’ appetites are shifting to other core asset types such as Manhattan office, mixed-use assets and development sites in the boroughs. B6’s analysis shows that investment opportunities still exist in specific neighborhoods, even as the wider market enters a period of uncertainty.

Takeaways:

On an annualized transactional basis, 2019 is on pace to return fewer than 2,000 transactions across NYC. That’s a level not seen since the “Great Recession” and 20% off the five-year average.
Dollar volume reached $15.6B in the first half of 2019, putting it on pace to reach just $34B for the year. That figure would represent a drop of 56% from the peak of the market in 2016.
Multifamily has seen a citywide decline of 42% in transactional activity from last year.
Northern Manhattan has seen a 61% drop in transactional activity compared to the first half of 2018, largely from the multifamily sector.

The first half of 2019 saw 912 transactions worth $15.6B in activity across Manhattan, Northern Manhattan, Brooklyn, Bronx and Queens. That represents a 36% drop in transactional volume from the first half of 2018, which saw 1,416 transactions for $19.1B in consideration. Price per square foot remained strong with an all-time high of $646 across core asset types.

$15.6B

Dollar Volume

18% YoY

912

Transactions

36% YoY

$646

Price Per SF

17% YoY

Northern Manhattan (-61%) and Brooklyn (-43%) saw considerable drops in transactional volume year-over-year, driven by the multifamily sector. Elsewhere, the Bronx saw a decline in activity of 41%, as did Queens (-27%) and Manhattan (-7%).

Price per square foot in core asset types and price per buildable foot continue to increase to all-time highs. Price per square foot citywide is up 17% year-over-year to $646, with the biggest gain coming in Manhattan. Meanwhile, buildable price per square foot has increased 14% year-over-year to $283, demonstrating continued value for prime development sites across New York City.

On an asset level, the office sector has continued its strong performance with a 9% increase in pricing from 2018 in Manhattan. The office sector is the only sector on pace to increase in transactions year over year.

Explore other trends at the market, submarket, and property type level below.

MarketAdd up to five markets to the view below

Brooklyn

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SubmarketAdd up to five submarkets to the view below

Bedford Stuyvesant, BK

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Dollar Volume

Quarterly totals, 2009—2019

Dollar Volume

Expand

Transactions

Quarterly totals, 2009—2019

Transactions

Expand

Price per Square Foot

Quarterly mean $/SF, 2009—2019

Price per Square Foot

Expand

No data available

Mouseover a line to show values

Mixed-use Absorbs Demand

Demand for the multifamily asset category — which includes walk-up and elevator apartment buildings — has been softening since 2017. After contributing over 35% of transactional activity between 2009 and 2016, multifamily’s share of total activity has dropped to 26% in 2019 so far. The walk-up sector — which contributes the majority of multifamily sales — is on pace to see only 424 transactions in 2019, down 42% from 2018.

Multifamily demand is being absorbed by mixed-use assets, particularly in the boroughs. Mixed-use made up 31% of total activity in 1H19, marking the first time this decade that demand for another asset class has surpassed multifamily. If this pace continues, 2019 will be record-setting for mixed-use assets, with $5.2B in property anticipated to sell. That would represent an increase of 23% from 2018 and 74% from 2015. The average price of an eight-unit, mixed-use asset has also risen from $5.6M to $8.4M over the last two years.

Territory Spotlight

Sweeping changes are coming to the New York real estate market by way of new rent regulations that passed the New York State Senate and Assembly last month. While the impact of the new rules on the investment market may not be immediate, many real estate investors are bracing for an uncertain future. Even if existing multifamily stock is most directly affected, B6 expects a continued slowdown in activity across most asset types in response to the rent regulation.

But even in this environment, opportunity still exists in certain pockets of the city. So B6 tapped three of its brokers to find out where they see potential upside in their neighborhoods. They highlighted trends in Bushwick, Harlem, and Queens that will likely spur investment over the longer term.

DJ Johnston

646.933.2619

djohnston@b6realestate.com

Bushwick

DJ Johnston

Partner, Senior Managing Director

I think [the Bushwick rezoning] is going to have a significant impact on the neighborhood as a whole. It’s going to promote private investment across every pocket of Bushwick. It may not double and triple land values, but I do think it increases values by 30 to 40 percent in certain areas, which will certainly accelerate transaction activity.

DJ Johnston

Bushwick’s Recent Performance

The first half of 2019 was relatively slow for Bushwick, where only 19 commercial transactions occurred through June 15. Annualized transactions are on pace to fall another 29% year-over-year, continuing a slide dating back to 2015.

Properties Transacted in 1H19

Bushwick Transactions Decline

Total 1H Transactions, 2009 - 2019

Bounds of Bushwick Rezoning Plan (via Curbed)

But DJ Johnston — a Partner and Senior Managing Director at B6 who focuses on the Bushwick area — sees some reason for optimism. He points to New York City's plan to rezone Bushwick, first unveiled in April, as a potential catalyst for longer-term growth. "I think over time, it's really going to change the face of Bushwick," said DJ.

Rezoning Increases FAR

The proposal is intended to promote affordable housing, renovate open space, and improve transportation. But DJ was also surprised by the “significant increase in density that [the city] is proposing” in certain pockets of Bushwick.

In a number of the newly defined zoning districts, as represented on the map, the allowable floor area ratio for commercial and residential uses would increase two to three times its current zoning allowance. Land in the C4-4D zones on Broadway, in particular, would be up-zoned to a maximum residential FAR of 7.2.

Proposed Zoning Districts

C4-5A 4.6 FAR (residential)

C4-5D 5.6 FAR (residential)

C4-4D 7.2 FAR (residential)

Mid-Density (M3) 3.0 FAR (commercial)

Substantial up-zoning along transit corridors on Wyckoff, Myrtle, and Broadway would make the neighborhood more attractive to large-scale developers. And with those projects come neighborhood amenities and additional retail options.

DJ sees land along the L and J-Z subway lines as investment opportunities moving forward.

I like areas like the Halsey L train for commercial development, and the Gates J/Z train for mixed-use development...those neighborhoods have character, strong upside fundamentals, and a good balance of product types that investors can capitalize on.

DJ Johnston

Harlem

David Chase

Partner, Executive Managing Director

I see Bushwick and Bed-Stuy as the closest comparisons to Harlem right now...we’re seeing similar growth and opportunities.

David Chase

Harlem’s Recent Performance

The Harlem submarket got off to a hot start in 1Q19, with dollar volume topping $350M for the first time since 2016. Both dollar volume and transactions, however, tapered off in 2Q.

Still, property in Harlem continues to get more expensive on a price per square foot basis, topping $600 in 1H19.

Properties Transacted in 1H19

Harlem is Getting More Expensive

Avg. $/SF in Harlem vs. NYC, 2009 - 2019

Mouseover a line to show values

A Development Resurgence

And development activity in Harlem is turning a corner. David Chase — a 17-year real estate veteran who oversees the area for B6 — was a little surprised that East Harlem’s rezoning in 2017 didn’t induce more large-scale, development projects. “I expected more to be honest with you,” he said.

But according to B6's internal data, there are now 67 sites in the pre-construction or construction phase across Harlem.

Current Development Sites

Opportunities in Harlem

David envisions more investment opportunities in Harlem over the coming decade. Columbia University is finally making real progress on its planned expansion into Manhattanville, having already completed three buildings on the new campus. With the Columbia Business School slated to relocate to Manhattanville in 2022, West Harlem could be approaching a breakout moment.

You can see what's attracting [developers] to West Harlem...I think Columbia’s expansion plays the biggest role there. In West Harlem, you'll need housing for people who won't be living on campus...and that sparks interest for investors who are building and purchasing rental properties in the area.

David Chase

Meanwhile, in East Harlem, New York City's plan for the Second Avenue Subway could have major implications for the neighborhood. After years of false starts, the city finally completed phase one of the project in 2017, stopping the line at 96th Street. The second phase promises to extend service all the way to Lexington and 125th Street in East Harlem.

“We're going to see activity in the coming months and years on this corridor,” David said, noting that B6 is already starting to represent property owners in Harlem along the proposed line.

Queens

Thomas Donovan

Partner, Vice Chairman

Long Island City, Astoria, and Sunnyside — the three surrounding neighborhoods — had already caught fire. Amazon’s [plan for HQ2] was just the cherry on top. If you take the cherry out, they're still on fire.

Thomas Donovan

55-01 Second Street (via The Real Deal)

Even as Amazon pulled out of its planned HQ2 in Long Island City earlier this year, commercial activity in the near vicinity ballooned. Dollar volume across LIC, Astoria, Sunnyside, and Woodside grew 35% in the first half of the year, driven in part by the sale of a 1.6 million square foot development site in Hunters Point.

Industrial Assets Drive Growth

Thomas Donovan — a Partner and Vice Chairman at B6 — has observed the Queens market since 1998. He sees a shift underway in the product type that investors are gravitating to. "Multifamily is slowing...but industrial is picking up the slack," he said.

He sees industrial assets as a key driver of growth across Queens.

Industrial Properties Transacted in 1H19

There’s Demand Beyond LIC

The growth isn't just relegated to select neighborhoods like Long Island City and Astoria. Annualized dollar volume across Queens is on pace to fall just short of $4.6B, in what would be the second-highest total this decade. And price per square foot has also increased substantially across most Queens neighborhoods.

Change in Price/SF, 2018-2019

Decrease

Increase

“Everybody talks about Long Island City, but the borough is so dynamic that that's not the beginning and end,” Thomas noted.

Still, Thomas urges caution as we head into the latter half of 2019 in light of the new rent regulations. “I think we’re going to see a buyer’s market the next six to 12 months,” he said.

“Long Island City is still a good market, but this [rent regulation] is going to affect the whole city.”

To learn more about B6 Real Estate Advisors exclusive listings throughout the New York Metropolitan area:

View Listings

Methodology

All metrics presented in this report — Dollar Volume, Transactions, Price per Square Foot, and Price Per Buildable Square Foot — are based on closed sales that occurred before June 15, 2019. Only portfolios located within Manhattan, Brooklyn, Bronx, or Queens with a sale price of at least $1,000,000 were included in our calculations. We consider the divide between the Manhattan and Northern Manhattan markets to be 96th Street on the eastside and 110th Street on the westside. Data comes from Reonomy, RCA, ACRIS, NYC Open Data, and our own data repositories.

We used the following definitions to record the property type of each transacted building:

C1, C2, C4, C5, C9
D1, D2, D3, D5, D8, D9
K4 and all “S” classes (S0, S1, S2, S3, S4, S5, S9)
select “K” classes (K1, K2, K3, K5, K6, K9) / select “R” classes (R5, R7, R8, RK)
All “O” classes: (O1, O2, O3, O4, O5, O6, O7, O8, O9) and RB
All “E” classes (E1, E3, E4, E6, E7, E9), all “F” classes (F1, F2, F4, F5, F8, F9) and RW
G0, V0, V1, and other properties purchased for development

We excluded the following property types from our analysis altogether:

Co-Op/Condo Buildings: C classes (C6, C8), D classes (D0, D4), R classes (R0, RM)
Residential Buildings: All “A” classes (A0, A1, A2, A3, A4, A5, A6, A7, A8, A9), all “B” classes (B1,B2,B3,B9), and select “C” classes (C0, C3)

Disclaimer

Chris Waggoner Photography

1Q 2019

Block by Block

B6 Real Estate Advisors NYC Market Insights.

A comprehensive data analysis providing macro and micro market trends for NYC commercial real estate.

Chris Waggoner Photography

Overview

The investment sales market in 2019 got off to a slow start amid uncertainty in the broader economy and speculation that the New York state Senate will implement major rent reforms this summer.

Here are our key takeaways from the first three months of the year:

On an annualized transactional basis, 2019 is on pace to be the lowest tally in eight years.
Development investment across New York tailed off in 1Q19, though development as a share of total dollar volume increased to record levels in 2018.
The Multifamily sector is lagging due to political uncertainty, but activity will increase in the second half of the year if news from Albany is positive for landlords.
Transaction velocity and development activity both suggest a shift in demand from Brooklyn to Queens.

A Sluggish Start to 2019

The first quarter saw 440 transactions worth $7.3B in activity across Manhattan, Northern Manhattan, Brooklyn, Bronx and Queens, down 38% in transaction volume from 1Q18, which saw 713 transactions for $9.2B in consideration.

$7.33B

Dollar Volume

20% YoY

440

Transactions

38% YoY

$661/SF

Price per SF

14% YoY

Brooklyn and Queens led the way in transactions for 1Q19 with 147 and 126, respectively, making up 62% of total volume. Yet, the 147 transactions closed in Brooklyn was 42% below the five-year average and 47% below 1Q18. While all markets trended below their five-year average in 1Q19, Queens outperformed other markets by keeping a steady transaction volume. Activity in Queens amid an otherwise slow quarter demonstrates the continued shift from Brooklyn to Queens.

Citywide, price per square foot for all property types increased 14% to $661 per square foot from this time last year and 5% from all of 2018. Northern Manhattan saw the largest increase in price per square foot per market with an increase of 14% from 2018. The office sector, meanwhile, saw an increase of 26% from 2018, representing the largest increase for a property type.

Explore other trends at the market, submarket, and property type level below.

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Dollar Volume

Quarterly totals, 2009—2019

Dollar Volume

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Transactions

Quarterly totals, 2009—2019

Transactions

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Price per Square Foot

Quarterly mean $/SF, 2009—2019

Price per Square Foot

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No data available

Mouseover a line to show values

Shift in Multifamily Investor Demand

A shift in investor demand since 3Q18 to product such as 2-4 unit residential properties and mixed-use assets saw considerable reduction in transaction volumes for the multifamily sector. Elevator properties in 1Q19 totaled 21 transactions for $807 million, while walk-up multifamily properties saw 106 transactions for $522 million sold citywide. Together, both property types saw a 48% drop in transactions and a 43% reduction in dollar volume from 1Q18. Overall transaction flows are down 24% from their five-year average.

The reduction in transaction flows from these property types is due in part to uncertainty in the state capitol. With New York’s rent stabilization laws up for renewal in June, properties containing at least 50% free market units represented 45% of all multifamily sales this quarter. A 21% jump in price per square foot from 2018 for free market or renovated assets clearly shows a premium for these properties.

Spotlight: The Trajectory of Development

Beginning after the last recession, properties acquired for development have taken a more prominent share of total transactions and dollars than ever before, permanently altering the physical landscape of New York City and the dynamics of the real estate market within the most recent property cycle.

The share of development sites relative to the entire property market grew an average of 19% year-over-year from 2009—2015, culminating in an all-time city record of $13.8B in activity in 2015 or 18% of total activity. Since the height of the development sales market in 2015, the demand for development sites has been uneven, but rebounded in 2018, with $7.4B in dollar volume across New York City. That total was the third-highest in the last decade and represented an increase of 88% year-over-year.

Those numbers are down a bit as we start 1Q19, though price per buildable square foot continues to increase.

$1.02B

Dollar Volume

10% YoY

Transactions

57% YoY

$311/BSF

Price per Buildable SF

26% YoY

A Regression in Development

The growth of development sites last year was particularly notable because it happened in an otherwise flat market. Annual dollar volume in 2018 witnessed a net decline across other property types such as office and retail, while development alone grew $3.5B. This represented over 20% of all dollar volume in 2018.

So far in 1Q19, development’s share has regressed slightly from last year’s highwater mark. Development investments continue to sell in the outer boroughs at an impressive pace, accounting for 93% of development transactions in 1Q19. Through 1Q19, however, dollar volume dropped to $1.02B for the quarter, 10% lower than 2018. Transactional velocity saw the steepest decline, with only 41 transactions in 1Q19. That ranks as the lowest number of development transactions in a first quarter since 2011.

Development’s Share of NYC Dollar Volume Has Been Growing

Annual share of dollar volume by market, 2009—1Q 2019

Markets

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Where is Development Happening?

Even as development sales slowed somewhat in 1Q19, it remains an integral part of the investment landscape in New York City. So which areas of the city are enjoying a development boom?

Brooklyn continues to account for the largest share of development transactions, with 141 transactions in 2018. Yet, Brooklyn’s share has actually declined over the last five years as development interest shifts to Queens and the Bronx. You can see this on a submarket level as well; while development transactions have declined for three consecutive years in Williamsburg, development activity in Astoria more than doubled last year.

Data also suggests that it remains significantly more expensive to develop in Manhattan than other parts of the city. The price per buildable square foot in eleven Manhattan neighborhoods — including SoHo ($1,259), Midtown ($912), and Greenwich Village ($799) — exceeded the $/BSF seen across other submarkets in 2018. Sunset Park, Brooklyn registered the highest $/BSF in the outer boroughs last year ($550) and also saw the second-highest year-over-year growth citywide.

Explore the map below to see shifts in development activity at a granular level.

Development Sites

Annual $/BSF, by Submarket

Fewer

More

2013

$ / BSF Transactions

2013

2018

Top Submarkets

In Manhattan

Top Submarkets

Outside of Manhattan

Methodology

All metrics presented in this report — Dollar Volume, Transactions, Price per Square Foot, and Price Per Buildable Square Foot — are based on closed sales that occurred before March 31, 2019. Only portfolios located within Manhattan, Brooklyn, Bronx, or Queens with a sale price of at least $1,000,000 were included in our calculations. We consider the divide between the Manhattan and Northern Manhattan markets to be 96th Street on the eastside and 110th Street on the westside. Data comes from Reonomy, RCA, ACRIS, NYC Open Data, and our own data repositories.

We used the following definitions to record the property type of each transacted building:

Walk-up: C1, C2, C4, C5, C9

Elevator: D1, D2, D3, D5, D8, D9

Mixed Use: K4 and all “S” classes (S0, S1, S2, S3, S4, S5, S9)

Retail: select “K” classes (K1, K2, K3, K5, K6, K9) / select “R” classes (R5, R7, R8, RK)

Office: All “O” classes: (O1, O2, O3, O4, O5, O6, O7, O8, O9) and RB

Industrial: All “E” classes (E1, E3, E4, E6, E7, E9), all “F” classes (F1, F2, F4, F5, F8, F9) and RW

Development: G0, V0, V1, and other properties purchased for development

We excluded the following property types from our analysis altogether:

Co-Op/Condo Buildings: C classes (C6, C8), D classes (D0, D4), R classes (R0, RM)

Residential Buildings: All “A” classes (A0, A1, A2, A3, A4, A5, A6, A7, A8, A9), all “B” classes (B1,B2,B3,B9), and select “C” classes (C0, C3)

Disclaimer
B6 Real Estate Advisors, LLC © 2019. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice. It is the responsibility of the prospective purchaser to make an independent determination as to the condition of the property (or properties) in question and prospective purchasers cannot rely upon any representation made by B6 Real Estate Advisors, LLC or any personnel associated with B6 Real Estate Advisors, LLC.