As the New York metro area continues to experience a period of strong multifamily expansion, the high demand and shrinking vacancies are stretching far beyond the high-rises and walk-ups of Manhattan. Brooklyn, the city’s largest borough by area, is seeing extraordinary growth in this sector, and rents here are beginning to rival those seen across the East River.
According to Marcus & Millichap’s latest quarterly report, asking rents rose an impressive 3.8 percent year-over-year between the fourth quarters of 2011 and 2012—hitting $1,617 per month. While the increase is less striking than the 6.9 percent uptick during the previous year, it remains far higher than many top-tier metros across the country and is expected to continue through 2013.
As a result of this, construction is expected to pace upwards over the next few quarters, but this will not be enough to allay rising prices. Developers are expected to deliver 1,340 market-rate units this year, with a 3,200-unit pipeline that could extend well into 2015.
Additionally, vacancy is expected to fall another 10 basis points to 1.8 percent by the end of the year, reflecting the aforementioned fundamentals in the market. Interestingly enough, this rate is actually lower than the current vacancy level in Manhattan—which currently stands at 2.3 percent.
Bolstering the demand for apartments in New York is steady employment growth that has consistently stood above that of the rest of the country. The city overall saw payrolls grow at the fastest pace in 12 years in 2012, translating into a 2.5 annual increase—or 93,300 new positions.
Marcus and Millichap notes that the professional and business services sector continues to be home to the most growth, while leisure and hospitality have also made significant gains.
The most highly valued property sale in Brooklyn in Q4 2012 was located on 719 8th Ave. in the Prospect Park neighborhood—a quickly growing submarket within the borough. The 32-unit property sold for a whopping $12.3 million, or $384,375 per unit.
Meanwhile, the least valuable transaction was for a six-unit property on 229 Suydam St. in Bushwick, selling for $597,500—or $94,583 per unit. Marcus & Millichap expects that overall rents will continue to rally throughout the year, likely reaching $1,650 by year’s end.
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