BLOCK BY BLOCK 1Q21 B6 Real Estate Advisors NYC Market Insights. A comprehensive data analysis providing macro and micro market trends for NYC ...
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1Q21 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.
1Q 21 - MAR K E T U PDATE
In Like a Lamb...
• NYC investment sales transactions are down 30% from 4Q20 and remain at historically low
levels with only 2 sales over $100 million.
• Price per square foot in NYC fell by more than 18% from year-end 2019, with the office sector
falling more than 30% in the same time period.
• Manhattan investment sales at lowest total recorded since at least 2009 with only 50
transactions this quarter.
• We expect 2Q21 to replicate 1Q21 levels, but anticipate the second half of 2021 will approach
the long-term average of over 400 transactions per quarter.
The New York City investment sales market started the new year with the same muted market-wide performance that
it ended with in 2020. The year started with 296 sales completed in the first quarter for a total consideration of just
$2.38B citywide. While the first quarter was significantly off the average transactional volume of 461 sales, this was not
surprising news. As we predicted at the end of last year, we expected the first quarter to deliver results similar to the
last three quarters of 2020. While the subdued transactional volume was expected, the return of only $2.3B in sales was
unexpected as only 2 sales over $100 million transacted in 1Q21.
While the first quarter’s results left much to be desired, we remain confident that the second half of 2021 will see a return
to the long-term transactional averages as the vaccine roll-out continues its momentum and businesses and people alike
begin to return to the city.
NEW YORK CITY - QUARTERLY TRANSACTIONS
900
870
800 709
700
600 407
500
400
300 179
247
200 354
296
100
2Q20
4Q19
4Q09
4Q15
4Q16
4Q17
4Q18
1Q09
4Q12
4Q13
4Q14
3Q16
2Q19
3Q19
1Q20
3Q20
1Q17
2Q17
3Q17
1Q18
2Q18
3Q18
1Q19
2Q09
3Q09
4Q10
4Q11
1Q10
2Q10
3Q10
1Q12
2Q12
3Q12
1Q13
2Q13
3Q13
1Q14
2Q14
3Q14
1Q15
2Q15
3Q15
1Q16
2Q16
4Q20
1Q11
2Q11
3Q11
1Q21
Source: B6 Real Estate Advisors
2
1Q 21 - MAR K E T U PDATE
Pricing Continues to Fall
As the investment sales market continues to be impacted by the effects of the
pandemic, pricing for all core asset types[1] across the city fell to $520 per Overall average price per
square foot in the first quarter, a decrease of 3% from the end of 2020 and square foot across the city
18% from 2019. Multifamily assets dropped nearly $100 per square foot from has reverted to 2013-14
$474 at the end of 2019 to $376 in 1Q21. While this can be attributed largely to levels.
the impacts of the rent regulation laws in the city, it also highlights the shift of
investor interest away from multifamily, particularly in Manhattan, to other asset
types and smaller multifamily product in the boroughs. For the last 30 months,
the bid/ask spread in the
While multifamily has certainly impacted the overall price per square foot property markets between
metrics across the city, the other core asset types have also seen declines in sellers and buyers has
year-over-year pricing. Mixed-use assets have seen a 17% drop from the end of been significant and has
2020 and office has seen an 18.5% decline since the end of last year. The average been the primary reason
price per square foot for office properties has fallen nearly 30% since 2019 with for the lack of transactions
few significant assets over $500MM selling in the last year. Overall average price leading up to 2020 and
per square foot across the city has reverted to 2013-14 levels. into the “COVID era”.
While declining prices are a laggard indicator highlighting the severe impact
COVID has had on the property markets, there is a silver lining that should not
go unnoticed. For the last 30 months, the bid/ask spread in the property markets
between sellers and buyers has been significant and has been the primary reason
for the lack of transactions leading up to 2020 and into the “COVID era”. It is clear
from the pricing data that sellers are beginning to accept the current market and
investors are willing to transact when pricing is more in line with their expectations.
NYC AVERAGE PPSF AVERAGE PPSF
$700 $700 $547 $581 $629
$467 $607
$650 $580 $534
$600 $443
$530 $520
$600 $472
$500 $383
$550
$500 $400 $358
$488.00
$450 $300
$400
$520.00 $200
$350
$300 $100
$250 $-
2Q20
4Q09
1Q09
4Q12
4Q15
4Q18
3Q10
1Q12
3Q13
1Q18
2Q11
2Q14
1Q15
3Q16
2Q17
3Q19
1Q21
Source: B6 Real Estate Advisors
3
1Q 21 - MAR K E T U PDATE
Transactional Activity
The total number of transactions completed in the first quarter of 2021 totaled
296 across the Bronx, Brooklyn, Manhattan and Queens, in line with our 4Q20
Manhattan’s total of 50
projections. We expect transactional levels in the second quarter to incrementally
transactions for a quarter
increase over the last quarter and a significant increase in transactions during
is the lowest figure since
the second half of 2021. Quarter over quarter, 1Q21 was down 30% from our
at least 2009, when 52
revised 4Q20 numbers. Interestingly, an ACRIS backlog issue resulted in nearly
transactions were recorded
100 transactions being added to the last 5 days of 2020. 4Q20’s revision from
in the first quarter.
297 to 407 transactions in the closing days of 2020, pushed closings that would
have likely closed in the first quarter of this year into the tail end of last year.
We speculate that these transactions were pushed forward due to concern over The lack of dollar volume
potential capital gains increases from the newly elected Biden Administration. highlights the lack of
institutional sales over
On a market level, Brooklyn contributed the most transactions (143) for $576MM, $100MM that have occurred
with the multifamily sector the most active with 54 transactions in the borough. during the “COVID era”.
Queens followed with 71 sales for $323MM, Manhattan had 50 sales for $1.96B
and the Bronx rounded off the quarter with 32 sales for $121MM. Manhattan’s
total of 50 transactions for a quarter is the lowest figure since at least 2009,
when 52 transactions were recorded in the first quarter.
Total consideration for dollar volume in the first quarter was just $2.96B across
the boroughs, down 50% from 4Q20, 69% from 1Q20 and 9% from 2Q20. The
lack of dollar volume highlights the lack of institutional sales over $100MM that
have occurred during the “COVID era”. Of the sales in 1Q21, only 2 exceeded
$100MM, and of the 1,316 sales in 2020, only 27 were above $100MM.
Citywide, multifamily properties contributed 122 sales, mixed-use 60 sales, and
development and retail clocked in with 35 and 31 sales respectively.
NEW YORK CITY ANNUAL ACTIVITY
$80,000 3500
2893 2887 2752
$70,000 3000
2476 $9,540
$60,000 2156 2211 2500
2131
$50,000 1836
2000
$40,000 1432
1189 1184 1500
$30,000 870
738 1000
$20,000
$10,000 500
$- 0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Transactions Dollar Volume
Source: B6 Real Estate Advisors
4
1Q 21 - MAR K E T U PDATE
...Out Like a Lion
Despite a slow start to 2021, there is a tangible sense of optimism from real
estate professionals in New York City. Increases in residential leasing velocity, Store closures, both
employment statistics in NYC and COVID vaccine deployment will determine temporary & permanent,
how quickly people return to working and living in the city. During 2020, resulted in nearly 40%
roughly 400,000 residents fled to suburban communities surrounding the city, of Manhattan’s brick and
as well as states like Florida. Mass layoffs in almost all sectors resulted in a mortar retail locations
20% unemployment rate by the end of May 2020. Store closures, both temporary going dark, turning New
and permanent, resulted in nearly 40% of Manhattan’s brick and mortar retail York City into a modern-
locations going dark, turning New York City into a modern-day ghost town. day ghost town.
The impact on real estate in the city, driven particularly by mass unemployment
and flash migration, was felt not only in brick-and-mortar retail, but also in
In August 2020, 22% of all
the residential leasing markets. Available inventory spiked to nearly 75,000
apartments on StreetEasy
units in August 2020, compared to just 29,000 units on the market in January
offered some form of
2020, according to StreetEasy data. Median asking price in January 2020 was
concessions to renters. That
$2,900 and fell to $2,500 citywide in November of last year, demonstrating the
has dropped to just 7% as
enormous pressure multifamily owners, investors and banks faced during 2020
people have begun moving
when trying to value or underwrite assets.
back into the city and
renting apartments again.
NEW YORK CITY RENTAL INVENTORY
80000
70000
60000
NUMBER OF UNITS
50000
40000
30000
20000
10000
2018-10
2016-10
2019-10
2010-04
2010-01
2010-07
2014-04
2020-04
2017-04
2020-01
2020-07
2010-10
2011-04
2013-04
2017-01
2017-07
2011-01
2011-07
2012-04
2012-07
2013-01
2013-07
2014-01
2014-07
2015-04
2014-10
2015-01
2015-07
2015-10
2017-10
2020-10
2011-10
2012-01
2018-04
2021-01
2012-10
2013-10
2016-04
2016-01
2016-07
2018-01
2018-07
2019-04
2019-01
2019-07
Source: StreetEasy Rental Inventory
51Q 21 - MAR K E T U PDATE
...Out Like a Lion
These external factors which contributed greatly to the market meltdown in 2020 have recently seen their indicators move into
positive territory again, not only reaffirming New York City’s resilience but its appeal to investors once more. In August 2020,
22% of all apartments on StreetEasy offered some form of concessions to renters. That has dropped to just 7% as people have
begun moving back into the city and renting apartments again. In fact, data from Jonathan Miller via the NYTimes showed
a 94% increase in rental activity from the same period last year. Unemployment in the city has dropped significantly from its
peak in May 2020, hovering around 6% in March. Leisure, hospitality and retail jobs have been the most impacted, accounting
for nearly 35% of total jobs lost in the beginning of 2021. Retail is expected to fully recover all lost jobs by September 2021,
with leisure and hospitality expected to recover their job totals by August 2022. Currently, New York City has vaccinated
4.8M people with an average of nearly 50,000 people receiving their first dose per day, according to NYC Health.
COVID-19 VACCINE ROLLOUT
6,000,000 120,000
5,000,000 100,000
4,000,000 80,000
3,000,000 60,000
2,000,000 40,000
1,000,000 20,000
0 0
Total Doses Administered (daily) Total Doses Administered
What does the future hold?
What does this mean for commercial real estate, particularly the investment sales market? We believe activity will
accelerate through the summer and into the third quarter with transactional activity returning to its long-term average
of 400 transactions per quarter. Office properties will continue to be challenged as the entirety of the workforce will not
return to their offices until 2022. We expect a hybrid work from home policy will be deployed across a large percentage
of companies as businesses evaluate their current workspaces for the future and employees gradually become more
comfortable with office life. Multifamily and mixed-use properties in particular will see the lion’s share of activity, as
vacancy rate decreases coupled with rental rate appreciation will make these properties more attractive to investors.
This will stabilize the underwriting assumptions in these asset classes, further reducing the gap in the bid/ask spread.
In short, don’t bet against New York City.
Source: NYC Health - City Immunization Registry
61Q 21 - MAR K E T U PDATE
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 15, 2021. 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:
• Multifamily: C1, C2, C4, C5, C9, D1, D2, D3, D5, D8, D9
• Mixed Use: K4 and all “S” classes (S0, S1, S2, S3, S4, S5, S9)
• Retail Buildings/Retail Condo’s: Select “K” classes (K1, K2, K3, K5, K6, K9) /
select “R” classes (R5, R7, R8, RK)
• Office Buildings: All “O” classes: (O1, O2, O3, O4, O5, O6, O7, O8, O9) and RB
• Industrial Properties: 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
determined on a case-by-case basis
[1] Core asset types are Multifamily, Office, Mixed use, Industrial and Retail
FOR MORE INFORMATION, PLEASE CONTACT:
ADRIAN MERCADO B6 REAL ESTATE ADVISORS
Partner, Chief Information Officer 1040 Avenue of the Americas, 8 th Floor
646 933 2603 New York, NY 10018
amercado@b6realestate.com B6REALESTATEADVISORS.COM
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