Gold: “You can see on Bruckner Boulevard how the landscape has changed dramatically in the last 24 months.”
NEW YORK CITY—Bronx multifamily investment property prices increased sharply in 2016 as major transformations throughout the borough enticed demand, according to Ariel Property Advisors’ newly released Bronx year-end sales report on last year.
Investors were drawn to The Bronx for its upside potential, abundance of transportation options, as well as an increasing number of commercial and residential projects, the research reveals. Major new employers have also planted their flags in the borough, including Silvercup Studios and Fresh Direct. That, coupled with the opening of trendy new restaurants and national retailers, has changed how investors view The Bronx.
“The Bronx has undergone a renaissance,” declares Jason Gold, a director at Ariel Property Advisors. “You can see by walking down Bruckner Boulevard how the landscape has changed dramatically over the last 24 months.”
The Bronx’s relative affordability compared with other sub-markets helped fuel multifamily price appreciation in 2016, with pricing metrics up an average of 13% overall year-over-year. Price per unit climbed 19% to $163,290 and price per square foot rose 15% to $184, but even more striking was growth since 2012, with both metrics surging nearly 90%.
Cap rates compressed by an impressive 36 basis points to 5.19%. In fact, price gains for multifamily properties in The Bronx were the highest of any sub-market aside from Queens, with gross rent multiples rising by 111 points to 11.06 in 2016.
New investors appear to have taken notice of The Bronx in recent years. In 2016, Lightstone Group acquired several multifamily properties, including 1011 Carroll Pl., which it purchased for $11 million. Toronto-based Asden Properties bought 3555 Bruckner Blvd. for $25 million, and Manhattan-based Thor Equities is in contract to own its first property in the borough at 975 Walton Ave.
For the year, dollar, transaction and property volume for all asset classes in The Bronx dropped by 16%, 5% and 7%, respectively. These declines, however, reflected a pull-back from 2015’s record-setting year, a period driven by several institutional-caliber transactions.
After years of rapid growth, The Bronx development market leveled off in 2016, but valuations appreciated. The average price per buildable square foot increased to $64 from $60, due largely to several South Bronx development sites trading at over $100 per buildable square foot.
The South Bronx neighborhoods of Port Morris and Mott Haven saw $80 million and $37 million in development sales, respectively. Treetop Development purchased four parcels with over 240,000 total buildable square feet, creating a sizable assemblage adjacent to the Harlem River waterfront.
“The slowing of development sales last year was partly a result of the expiration of 421-a and a tighter lending environment,” notes Scot Hirschfield, a director at Ariel. “However, as The Bronx continues to mature and attract residents as a destination onto its own, the borough is primed for an uptick in development.”
Separately, The Bronx saw $210 million worth of commercial and retail assets change hands in 2016, a 6% drop from the previous year. Nevertheless, similar to other asset classes, price per square foot increased by 27% to $457, with some properties trading for over $1,000 per square foot.
“The Bronx has transformed dramatically in recent years, becoming a popular hub for both residential and commercial activity,” says Marko Agbaba, a director whose expertise is in the borough. “Major infrastructure projects underway should foster even more demand for properties in the borough.”
Looking ahead, the outlook for 2017 is more uncertain than it has been in recent years, with higher financing costs on the horizon, Ariel Property Advisors states. However, interest rates remain historically low and the Bronx’s economy has steadily improved, with the borough’s unemployment rate ending 2016 at 6.2%, down from 7.0% in 2015. Click here for the full report.