Market obServatIoNS by product type
comprehensive analysis of the first quarter of ‘09
Massey Knakal Realty Services - Northern Manhattan Sales and Research Team3Multifamily:11 multifamily assets traded in 2009 for an aggregate consideration of $55,365,500. Com-pared to 2008, these figures represent a 63% decline in turnover and 76% decline in dollar volume. Despite these declines, multifamily prices are holding better than other real estateassets, especially if the subject building has upside in the rents.Q1 2009 sales activity shows an average cap rate at 6.57%, which is 14% higher than 2008levels and 18% higher than 2007 levels. Investors would apply less of a discount to 2007numbers when dealing with properties which are well located and/or present significant up-side. Two buildings sold in the lower part of East Harlem suggest exactly that (see FeaturedTransactions). While the assets sold for less than 6% cap rate, the amount of upside and theprice per square foot suggest that this price is only 20% below 2007 levels.However, since Upper Manhattan has a large stock of stabilized apartments, prices for buildings uptown should hold firmer than prices for buildings located in neighborhoods withmore free market tenants.That being said, there are several clouds on the horizon that will continue to put downwardpressure on prices. These include an increase in alternative investments (real estate or oth-erwise), an uncertain regulatory environment and the belief that the number of buildings for sale will increase significantly as the market copes with mortgage resets that are scheduledto take place in the next few years.Commercial (NNN Leases):Several well located, triple net lease commercial buildings sold during the first quarter. Be-cause they require little management by the owner, pay good yields, and because Manhattanretail held in high regard by investors, these assets rarely sell. We believe these assets arenow selling because owners are either looking to reposition their portfolios or have decidednot to move ahead on development opportunities these one-story buildings sometimes pres-ent. Recent prices reflect values north of a 6-7% return, a marked increase from capitaliza-tion rates below 6% that were more common until 2007.Development Sites:It is very difficult to factually comment on development site prices because few develop-ment sites have sold in Q4 2008 or Q1 2009. Those sites that did trade were typically either conversions or purchased by users. One can make some inferences by looking at bidding/contract activity with development sites our team currently has on the market. For example,230 East 97th Street and 2304-06 Second Avenue are priced at $ 148 and $66 per buildablesquare foot. Looking at their locations, these asking prices represent an decline of 31% and45% from their peak values. Generally speaking, assets with a user component, convert-ible existing structure, or low absolute price point are holding their value better than largeparcels of raw land. Whereas the development market was previously dominated by condo-minium developers, today’s buyers tend to be users, affordable housing developers, or buy-and-hold investors looking to land bank today with an eye on a future sale or development.Townhouses:While average prices per square foot have seen a decline of approximately 15% in com-parison to the first quarter of 08’, the largest indicator of a softening in this market can beseen in the lower volume of sales. Disregarding transactions which were affected by stateor other auctioning agencies, the number of townhouse transactions in the 1st quarter of 09’ totals 7 transactions. This is down approximately 70% (23) from the same time last year.Lack of financing options, a smaller buyer pool and the deterioration of residential marketsin the greater metropolitan area has led to some of the lowest offering prices for uptowntownhouses in years.
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