“The multifamily market experiences a significant downturn as sales volume plummets by 40% compared to last year, signaling a shift in housing preferences and investor sentiment.”
Pesky interest rate rises continue to rattle New York City’s multifamily market, sinking transactions during the third quarter. There were 227 multifamily transactions from July to September for a total $1.6 billion in sales, according to data from New York-based Ariel Property Advisors reported by Crain’s. The transaction volume marked the slowest quarter of the year. It also represented a 40 percent decrease in deals made year-over-year.
The dollar volume drop was even more pronounced, a decrease of 58 percent from last year’s third quarter. Not only was it the lowest quarterly dollar volume this year, but it was also the lowest dollar volume since the first quarter of 2021, before the Federal Reserve began hiking interest rates to combat inflation.
Almost four out of every five deals that closed last quarter were for properties with market-rate units or existing 421a exemptions. Only 16 percent of the traded multifamily properties were rent-stabilized and a mere 4 percent were affordable housing properties.
Despite the slowdown, Ariel president Shimon Shkury touted the fundamentals of market-rate and 421 properties to Crain’s. Relaxed regulations about raising rents, particularly on market-rate properties, appear to be making those properties more enticing to investors.
The two largest deals of the quarter in terms of dollar volume were Pacific Urban Investors’ $185 million acquisition of 130 West 15th Street in Chelsea and the NYU Grossman School of Medicine’s $210 million purchase of 377 East 33rd Street in Kips Bay.
The slowdown in the multifamily market this year was widely expected after the Fed began raising interest rates. The sales volume in the sector last year was $16 billion, but things started slowing down during the second half of the year. That slowdown will likely continue until the Fed decides to cut interest rates, which it may not be poised to do anytime soon.
— Holden Walter-Warner