Brooklyn Apartment Market Bounced Back in a Big Way

By Dees Stribling, Contributing Editor

New York—While most New York City apartment markets have experienced a good run for landlords in recent years, the Brooklyn apartment has been especially strong, according to a new report by GFI Realty Services covering cap rates and gross rent multiplier trends. Moreover, the recovery from the recession for the borough’s apartments hasn’t merely been full—the market has bounced back further than pre-recession levels in many cases.

For example, despite the major price-plummet of 2008—which saw prices fall an astounding 60 percent or so in Crowns Heights—apartment buildings in that neighborhood sold for their highest prices ever in 2014, surpassing the highs of 2007. During the recession, trading Crown Heights multifamily buildings saw their highest cap rates at over 11 percent, compared to just 3.4 percent in 2014. Market-wide in Brooklyn, cap rates averaged 8 percent in 2003, but are currently averaging 6 percent.

During the same period (2003-14), the average price per unit of Brooklyn apartments more than doubled, climbing from $80,000 in 2003 to $200,000 at the end of 2013; median prices similarly jumped. A hypothetical buyer at the very bottom of the market in 2009 could sell in the current market and realize a 139 percent appreciation, the report said.

As for gross rent multiplier trends, in 2003 GRM was between eight and nine times rent rolls in Brooklyn. By 2014, it had hit peaks in the borough as high as 15 times.

Also, the report notes, foreign investors are increasingly turning to Brooklyn neighborhoods such as Downtown and Williamsburg, driving prices at new heights. Thus local investors are looking for apartments in areas more distant from Manhattan, heading east and south for value-add opportunities—thus making prices rise there as well.