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New York apartment building sales jump into a bet on the return of the city

(Bloomberg) — The market for New York City apartment buildings reigned in 2021 as a glimmer of normalcy appeared on the horizon for investors.

According to a report by Ariel Property Advisors, there were 386 multi-family transactions, up 53% from 2020. The dollar volume of those deals was approximately $8 billion, an increase of 72%.

In Manhattan, buyers took advantage of prices that are low relative to the past decade, the brokerage said, even as rents increased by 24% since 2020, near pre-pandemic levels.

Demand for rental buildings has been bouncing back from the depths of the pandemic, when New Yorkers left the city in droves. Investor appetite also waned after restrictive state laws governing older, rentable stable buildings were passed in 2019. Last year’s gains, which were replete with city apartments, show buyers are throwing their lots with bets on New York’s return.

“The multidisciplinary market has actually done 180 in 2021,” Ariel’s president, Shimon Shakuri, said in an interview. Demand has increased dramatically and investors expect prices in 2022 to rise even higher than last year, Shakari said.

In Manhattan, smaller deals dominated: About 57% of transactions involved buildings valued at $5 million to $20 million.

Individual international investors took a particularly active role, finding opportunities to buy when the dollar was relatively weak. Institutional investors expect a massive comeback this year on the back of a rally in prices, Shakari said.

Market-rate buildings were the most popular business, with affordable housing accounting for about 25% of last year’s dollar volume. According to Ariel, this share may increase as investors have pricing clarity under the new rental laws.

Citywide, multi-family deals are still well below the $11 billion mark reached in 2018 before the current rent rules went into effect.

© 2022 Bloomberg LP

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