In 2017, northern Manhattan real estate investors continued to enjoy enviable returns, with multifamily property prices appreciating on strong demand and limited supply. Activity has noticeably picked up in recent months as tenants and landlords chase neighborhoods offering sustained growth and a good basis, such as Hamilton Heights, an area where picturesque streets are interspersed with significant landmarks and institutions.
After a tepid start to the year, positive momentum during the latter part of the second quarter, accelerated in the third quarter as investors regained a comfort level with the overall market’s fundamentals and became increasingly more bullish about Northern Manhattan. In fact, New York City’s uppermost region was the only sub-market in the third quarter to register an increase in the number of investment sales on a year-over-year basis.
With five sales over $20 million, dollar volume during the quarter reached $364.55 million, its highest since the fourth quarter of 2016, according to Ariel Property Advisors’ “Multifamily Quarter In Review.” However, Northern Manhattan’s investment sales market continued to cool off from a historic peak reached two years ago, echoing a trend seen throughout the city.
From January through September, Northern Manhattan’s multifamily dollar volume decreased 60% to $761.76 million and transaction volume fell 26% to 73 transactions versus the same period in 2016, which saw 98 transactions, according to company research. The drop can be attributed to a dearth of large deals as there was an absence of properties sold for over $50 million during the nine months. By comparison, five deals sold for over $50 million during the same period in 2016. The largest multifamily transaction so far this year took place in Washington Heights, where Sugar Hill Partners purchased a 95-unit elevator building at 200 Haven Ave. for $41 million, or $329 per s/f.
In contrast to many other neighborhoods in Manhattan, multifamily property prices in Northern Manhattan reached record highs in the first nine months of the year, with the average price per s/f piercing $400 for the first time, climbing 12% to $424. The average price per unit also marked a milestone by surpassing $350,000, rising 6% to $353,492. Investors who bought multifamily buildings in Northern Manhattan have most certainly reaped handsome rewards, with the average price per s/f and average price per unit up an astonishing 20% and 21%, respectively, from 2015.
Hungry For Hamilton Heights
Its name derived from one of the country’s Founding Fathers, Alexander Hamilton, Hamilton Heights is one of Northern Manhattan’s most sought-after neighborhoods, both for residential and investment purposes. Hamilton resided in the region when it was largely farmland and his former residence is now known as the Hamilton Grange National Monument, one of the area’s biggest attractions.
Hamilton Heights is occupied by a considerable number of white-collar professionals and families. The Dance Theatre of Harlem, Harlem School of the Arts, and Aaron Davis Hall are all located in this westernmost area of Harlem, giving it a unique artistic vibe. Indeed, celebrities, artists, actors and writers heavily populate Hamilton Heights. Since it is home to City College and with Columbia University nearby, a slew of students and academics also inhabit the neighborhood.
Beautiful brownstones, spacious apartment buildings, and elegant row houses prominently line many of its quaint, tree-lined streets, so it is no surprise that Hamilton Heights has become one of the city’s most active neighborhoods for real estate investment. However, as was the case throughout the city, volume metrics in Hamilton Heights slipped from January through September. Multifamily dollar and transaction volume stood at $111.16 million and 9, down 32% and 53%, respectively, from the same period in 2016.
Pricing, meanwhile, jumped in the neighborhood, with average price per s/f at $431 during this period, a sizeable 25% increase over the same period in 2016 and due largely to buyers’ realization that there is an insatiable appetite for the asset in the area.
Despite higher prices, investors should remain enthusiastic about purchasing properties in Hamilton Heights as there remains significant upside, with rents well below other neighborhoods in northern Manhattan as well as other areas of the city.
A strong example of a multifamily property is The Ivey Delph Apartments at 13-19 Hamilton Terrace, a 78-unit elevatored building built in 1951 by renowned architect Vertner Woodson. The 49,616 s/f building, marketed by Ariel Property Advisors, is located in the prestigious Hamilton Heights Historic District. A valuable and unique feature is its status as a National Landmark, which enables investors to receive a 20% federal and 20% state tax credit for qualifying capital improvements made to the asset.
Looking ahead, bidding activity on active listings and contract signings has picked up significantly in recent months, suggesting the Northern Manhattan investment sales market may be in line for a much more active first quarter in 2018 compared to the same period in 2017.
Victor Sozio is an executive vice president and founding member – investment sales and David Baruch is a senior analyst – investment research at Ariel Property Advisors, New York, N.Y.
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