2012 commercial real estate sales were robust in Northern Manhattan

The total dollar value of commercial real estate transactions in Northern Manhattan jumped 87% in 2012 compared to 2011, while transactions increased 44%, and the number of properties traded in those transactions increased by 58%, according to Ariel Property Advisors' Northern Manhattan Sales Report 2012. Upper Manhattan had 296 commercial real estate transactions consisting of 393 properties with a total dollar value of $1.17 billion in 2012. Our firm classifies commercial properties as development, industrial, multifamily, office, SRO, user, and commercial/other sites. Most of the properties sold uptown were in Central Harlem, which captured 45% of the area's total sales, while Washington Heights captured 36% of the area's total dollar volume. The high dollar volume in Washington Heights was directly correlated to several large multifamily portfolios sold by institutional investors during the year. As seen elsewhere in the country, the expiration of the Bush-era tax cuts led to a jump in transactions during the second half of the year as investors looked to avoid major increases in capital gains taxes. The market for development sites also saw dramatic improvement in Upper Manhattan during 2012. The second half of the year saw development property sales more than double and dollar volume quadruple compared to the first half of the year. Pricing also gained steam and we head into the new year expecting to hit the highest levels since the collapse of Lehman Brothers. Year-over-year development sales in Upper Manhattan also increased, with a total of 62 development properties sold in 35 transactions valued at $116.939 million in 2012, up from 26 properties sold in 16 transactions valued at $51.967 million in 2011. Of the development properties sold uptown in 2012, Ariel Property Advisors sold about two dozen sites totaling approximately 340,000 s/f in 14 transactions. The firm has another eight uptown properties with 120,000 buildable s/f in contract, and we're marketing seven additional development sites with more than 172,000 buildable s/f. The development climate uptown is changing because the rental and condo market has improved and financing is more readily available. Experienced developers are returning to the market and seeking to buy additional sites, but there are few properties left. After peaking at $120 to $125 per buildable s/f in 2006-2007, prices of uptown development sites dropped to an average $55 per buildable s/f in 2008-2009. With rents now surpassing pre-crisis levels, the supply of newly constructed condominiums nearly exhausted, and little new construction in the pipeline, demand for vacant land recovered significantly in 2012. Prices for development sites averaged about $2 million and we expect to see more consistent trades above $100 per buildable s/f in 2013. Rental demand was very strong through the end of the year. CitiHabitats reported that Manhattan's rental vacancy rate averaged 1.38% in December 2012, which has put pressure on rents at a time when the city continues to add jobs. New York City's Independent Budget Office is forecasting the longest expansion in new jobs in more than 50 years with the addition of nearly 480,000 payroll jobs from the end of the recession in the fourth quarter of 2009 to the end of 2016. In the first 10 months of 2012, New York City issued building permits for 40 new residential buildings in Manhattan that will have 2,287 new units, which is dramatically lower than 2007 when Manhattan added 8,052 new apartments These local economic indicators, combined with record low interest rates and concerns over tax increases also explained why investors flocked to the multifamily market in Northern Manhattan in 2012. In 2012, multifamily transactions in Upper Manhattan rose by 63%, the number of properties traded increased by 70%, and dollar volume jumped 85%, compared to 2011. There were 150 multifamily transactions consisting of 211 properties valued at $789.564 million in 2012, compared to 92 transactions comprised of 124 buildings valued at $426 million in 2011. Although multifamily sales may slow following the flurry of closings in the fourth quarter of 2012, the demand for rental housing in Manhattan will remain healthy. Barring some unforeseen economic shock, we believe that multifamily sales will stay strong in 2013. More information about the uptown market is available in Ariel Property Advisors' Northern Manhattan Sales Report 2012 at http://arielpa.com/research/reports/. The Northern Manhattan Sales Report tracks all property sales $500,000 and above. Victor Sozio is vice president at Ariel Property Advisors, Manhattan, N.Y.