Surging ahead: Economic revitalization in the Bronx and what this means for New York - by Scot Hirschfield

Year-to-date, The Bronx’s real estate market continues its upward trajectory in 2016.  While some speculate that a citywide market correction may be on the horizon, recent demographic and socio-economic trends have put the Bronx on firm ground. Coupled with the significant investments being deployed, these trends give us confidence that the borough has only begun to scratch the surface of its potential.

A leading indicator of The Bronx’s progress is the borough’s sharp decline in unemployment. In April, the New York State Department of Labor reported the borough’s unemployment rate to be 6.6%, its lowest level since April 2008 and a sharp drop from its 2015 average of 7.7%. This recovery is especially notable considering the borough was one of the hardest hit by the recession. It also means residents are less reliant on government subsidies which will have positive implications on consumer spending and confidence, a potential boon for local businesses.

The Bronx is now approaching its 1970 population peak, when the borough had 1.5 million residents. According to the U.S. Census Bureau, the Bronx added 70,000 people between 2010 and 2015—a 5% increase in that time—making it the third fastest growing borough in the city.

The number of home sales in the Bronx also rose 35% in the first quarter of this year, a far larger increase than in Manhattan, Queens and Brooklyn, according to data prepared by the Real Estate Board of New York, a trade association.

These positive developments appear to be playing a driving role in Bronx real estate values. Ariel Property Advisors’ recently released Multifamily Quarter in Review: 1Q16 showed the borough’s average price per square foot increase to $172 from 2015’s year-end figure of $161. Average cap rates fell to 5.23%, which is 33 basis points down average 2015 levels. The GRMs continued to climb hitting, 10.62 in the first quarter of 2016.

Recent transactions illustrate this upward momentum. In March of 2016, 1511 Sheridan Ave., a 222-unit multifamily property in the Bronx, sold for $34.718 million, which translates to $172 price per s/f and roughly 13 times GRM. As the building last sold for $24 million in April of 2015, this represents a tremendous 44% increase in just one year.

Another noteworthy transaction is the purchase of 2320-2471 Grand Ave., a multifamily assemblage bought by the Lightstone Group, a national investment firm.  Lightstone, along with Harbor Group and Related are making a strong push into the borough with the purchase of rent-stabilized apartment buildings.  

On the development front, the De Blasio administration selected Trinity Financial and MBD Community Housing Corp. to build a large-scale, below market-rate housing complex with an emphasis on energy efficiency on a 30,000 s/f site at 425 Grand Concourse in Mott Haven.

New York City’s Department of City Planning is also reinvigorating the quality of life for its residents by recent renovations in the neighborhood. A few noteworthy initiatives include the reopening of The High Bridge, which connects Washington Heights in Manhattan and Highbridge, as well as, Bette Midler’s NYRP planting 825 new trees in the South Bronx.

Additionally, getting from Randall’s Island to the South Bronx was made a lot easier with the November 2015 opening of the Randall’s Island Connector, a $6 million pathway for pedestrians and bikers that links the borough to the island at 132^nd St.

Laying the groundwork for continued growth in the Bronx is the Special Harlem River Waterfront District (SHRWD) between 138^th and 149^th streets, which will turn an underutilized half-mile stretch of riverfront into a commercial, residential, and recreational waterfront district.

Lastly, we’ll know more this fall as to whether federal transit officials will approve money for a new Metro-North line linking the eastern Bronx to Penn Station. With four new Metro-North stations proposed along the New Haven line in Co-op City, Morris Park, Parkchester and Hunts Point, the $1 billion project will give residents a faster commute into Manhattan. This project would require waiting until Long Island Rail Road trains could enter Grand Central Terminal, a project slated to finish by 2023.

The overall expectation is that prices will remain strong as demand continues to outpace supply, as seen in the recently published Multifamily Quarter in Review on the borough. Early 2016 trends paint an increasingly bright picture for the Bronx real estate market.

Scot Hirschfield is a vice president at Ariel Property Advisors, New York, N.Y.