Optimism Remains High in NYC
Speakers at Ariel Property Advisor’s Coffee and Cap Rates event had high hopes for the nation’s biggest metropolis.
Heraclitus’s famous observation that “The only constant in life is change” was splashed across the first slide presented at Ariel Property Advisors’ Coffee and Cap Rates event in New York City. It was an appropriate reminder as Shimon Shkury, Ariel’s president & founder, mounted a defense of the ever-evolving city.
While much has changed over the past five years — from the 2019 Housing Stability and Tenant Protection Act to the pandemic, rising interest rates and high inflation — the city has gone through many transformations. Still, Shkury stressed his optimism. “The market that we kind of like the most — we’re biased — is multifamily.”
The city’s multifamily sector saw a 108 percent increase in dollar volume activity in the second quarter of the year when compared to Q1 2024, according to a mid-year sales report from Ariel. Furthermore, there was a quarter-over-quarter increase in dollar volume in every borough. As for the landscape over the next 12 months, Shkury predicted that multifamily transaction volume will continue to pick up.
Shkury is particularly bullish on the city’s free market multifamily sector, which has seen a 26 percent rise in rental rates over the last 5 years. And with strong fundamentals and significant supply constraints, all types of capital remain interested in the product type.
Speakers echo a similar sentiment
Shkury’s watchlist highlighted various topics for folks in the sector to keep an eye on: mortgage maturities, an abundance of capital, geopolitical risks, the “City of Yes” program and interest rates. Ralph Bumbaca, NYC market president at TD Bank, said that these factors are top of mind for him too.
“I’m encouraged we will break through this cycle,” Bumbaca said. “Onto the next.”
Bumbaca’s optimism includes hope for the “City of Yes” initiative’s impact on the multifamily space, heartened by the attention that multifamily has been receiving from legislators. While the market is in a cyclical downturn, and factors like inflation, higher overall costs and difficult zoning laws pose issues, he noted that deals are still getting done.
Christopher Albanese, president of the Albanese Organization, shares a similarly sunny outlook, though he conceded that there are difficulties in navigating the sector today. A severe housing shortage in the city has been compounded by the relatively small amount of new supply hitting the market. If current trends persist, with new housing supply declining year-over-year when it needs to be rising, rents will only continue to climb. Still, he see promising days ahead for the sector.
“There’s not question that there will be problems,” Albanese said. “But NYC will continue to grow. Young people want to be here.”
One place where there is opportunity to be found is in land deals for multifamily, said Jasper Wu, vice president at ZD Jasper. While rent prices are going up and vacancy figures going down, the place to find good opportunities at the moment is in land acquisition. However, development costs remain a concern.
Increased wage costs could increase Wu’s development hard costs by 20 to 30 percent, he remarked. But he is still bullish on the city, too. “It always comes back.”
