Jason Gold, Ariel Property AdvisorsThe story of the Bronx investment sales market during the last few years is that it’s proved itself as a worthy destination for capital. In 2015, dollar volume in the Bronx increased 16% year-over-year totaling $2.76 billion. Development sites made up 14% of overall volume, clocking in at $379.5 million, a 63% increase year-over-year. However, the big movement in the Bronx came from multifamily assets, which made up $1.8 billion, or 65% of the overall volume last year, and saw strong appreciation.
Multifamily pricing in The Bronx is especially notable when you compare today’s figures to those seen during highs witnessed in 2007, the peak of the last cycle. The average price per square foot in 2007 was $88 and in 2015 the number nearly doubled to $160, an 82% jump. The borough’s average capitalization rate in 2015 came in at 5.55%, which represents 1.5 fewer basis points than the 2007 average of 7.05%.
A tangible example of how these metric shifts have impacted the market is 1749 Grand Concourse, a 423,500 s/f Bronx multifamily property. Consisting of 274 units, the property sold in 2007 for $28.3 million, translating to $66 per s/f. That same building, owned by Azure Partners, traded again in May of 2015 for $49.5 million, securing approximately $117 per s/f. Further, this specific property closely follows the market’s trajectory for the last 8 years as the asset’s most recent May 2015 sale was actually the third time it has sold since 2007 – its 2010 price of $25 million and its 2013 price of $35 million represent the market’s decline and subsequent recovery.
In October, Ariel Property Advisors brokered the $90 million sale of the Continental Portfolio, a package of 13 multifamily buildings - one of the borough’s largest multifamily deals to take place in 2015. Combined, the buildings contain 612 units and have a gross area of approximately 553,304 s/f. The sale price of $90 million translates to over $160 per s/f, significantly below what many neighborhoods in Manhattan and Brooklyn are seeing.
Sound market fundamentals, attractive price points relative to the other boroughs and accessible transportation have played a central role in driving prices during this cycle and the last. However, our sense is that large institutional investments in the pipeline and a focused commitment to development by local leadership is taking demand and prices to new heights.
In order to facilitate more development and growth, the city’s current administration has initiated eight rezoning and study areas in the Bronx that will create even more opportunities for commercial development. These areas include: Lower Concourse, 161st St.-River Ave., East Fordham Road/Third Ave., Webster Ave., West Farms, Third Ave./Tremont Ave., Cromwell-Jerome Corridor and the Sustainable Communities Study.
During his recent State of The borough address this past February, Bronx borough president Diaz projected that 9,811 new housing units will soon come on-line as a direct result of private and city initiated rezonings, which have recently been adopted.
Since 2009, $9.3 billion has been invested in residential, commercial and institutional projects within the Bronx. Major institutional investors and developers—including, Extell Development, Signature Urban Properties, Vanbarton Group, Savanna and Chetrit Group/Somerset Partners—have begun major projects that will shape the borough’s growth in the future.
One example is the recently purchased Riverdale Crossing, a 159,037 s/f shopping center by investment and advisory firm Vanbarton Group for $133 million which brings a whole new dimension to the area. Formerly known as the Stella D’oro Cookie Factory and vacant for nearly two years, this outdoor mall has become home to BJ’s Wholesale Club, its anchor tenant. Other prominent retailers who have opened their first Bronx-based stores in Riverdale Crossing include as Petco, Chipotle and Smashburger.
The Bronx has come a long way in the last decade but still presents investors with significant upside. As its real estate market and economic landscape matures, gains will compound with each new public-private initiative, rezoning plan, and capital investment that materializes.
To view the The Bronx 2015 Year-End Sales Report or any of Ariel Property Advisors’ submarket or multifamily reports visit: http://arielpa.nyc/investor-relations/research-reports
Jason Gold is a vice president at Ariel Property Advisors, New York, N.Y.
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