Improving economic demographics are driving Northern Manhattan multifamily demand

Two Northern Manhattan neighborhoods were among the most popular with New York City multifamily investors in the first half of 2014, according to Ariel Property Advisors' Multifamily Quarter in Review: New York City I Q2 2014. More multifamily buildings traded in Washington Heights than in any other neighborhood in the city in 1H 2014, and Central Harlem ranked among the top six neighborhoods for multifamily trades. Between January and June of this year, 33 multifamily buildings sold for more than $228 million in Washington Heights, which translates to an average price per s/f of $206 and an average price per unit of $190,115. In Central Harlem in the first half of the year, 21 buildings sold for more than $74 million, or an average price per s/f of $305 and an average price per unit of $221,534. This activity is being largely driven by increased demand for residential rentals and, something that is less talked about, increasing household income levels in the area. Since 2000, the population of Northern Manhattan has grown by 3% with significant gains in West, Central, and East Harlem, the number of housing units has risen by 5%, and most importantly, the median household income has jumped 55% with advances in every zip code, according to Census estimates. The vacancy rate uptown was 1.06% in August and median rents increased 6.7% year-over-year to $2,295, the Elliman Report shows. A townhouse on Harlem's Striver's Row recently sold for $2.89 million, and condo buyers are now paying prices as high as $900 to $1,200 per s/f for new units in certain areas of Harlem. Today's real estate investors expect these strong fundamentals to be bolstered by a host of new projects currently underway. These include Columbia University's 17-acre campus currently under construction in West Harlem, the expansion of City College's research and technology facilities, and 300,000 s/f of class A, LEED Silver certified office space that will come on-line at the Taystee Building between 125th and 126th Sts. off Amsterdam Ave. Retailers and restaurants are also finding their way uptown, providing shopping destinations and services that residents once had to venture downtown for. A new Whole Foods, Burlington Coat Factory, American Eagle Outfitters, and a Banana Republic Factory Store are slated to join the Gap, Old Navy, DSW, and Blink Fitness on 125th St., Harlem's bustling commercial corridor. On Lenox Ave. off of 125th St., reservations are hard to come by at Red Rooster, which offers entertainment as well as comfort food and is located next door to the popular Harlem mainstay, Sylvia's, which also draws capacity restaurant crowds. Such changes are pushing multifamily prices higher and higher. Today's average prices per s/f are at record levels and capitalization rates for buildings with upside are regularly coming in under 5% and some are even under 4%. The development market also is benefiting from this activity. Interest has been strong in a long-term ground lease development opportunity that Ariel Property Advisors is marketing on a block-through property at 256-258 West 125th St. across from the Apollo Theater, and 243-249 West 124th St. where the massive Pabst beer garden was located in the early 20th century. The owner is seeking a partner to develop the property to its full potential as a premier residential and commercial destination. The block-through site features 100 ft. of frontage along 124th St. and 50 ft. of frontage along 125th St. and offers up to 108,994 buildable s/f for a mixed-use building with inclusionary housing. While such demand for a Harlem land lease might not have been attainable in the past, today's drastically improved economic fundamentals are creating more and more lucrative opportunities throughout Northern Manhattan. More information about the multifamily market is available from the Multifamily Quarter in Review: New York City I Q2 2014 at http://arielpa.com/newsroom/report-MFQIR-Q2-2014. Ariel Property Advisors is a New York City investment property sales firm with an expertise in the multifamily and development market. The firm also produces a number of research reports including the New York City Multifamily Month in Review, Multifamily Quarter in Review, Multifamily Year in Review, and Mid-Year and Year-End sales reports for the Bronx, Brooklyn, Northern Manhattan, Manhattan, and Queens. For more information see arielpa.com. Michael Tortorici is a vice president at Ariel Property Advisors, New York, N.Y.