INVESTMENT FORECAST

MULTIFAMILY 2020
New York City Metro Area

Move-Ins by Technology Firms Foretell New Renter Economic Trends

Demand; Investors Respond to Legislative Reforms HH Growth Employment Change (%)

New HH Formations (thousands)

52 4%
New tenant leases outpace supply, keeping vacancy near its lowest practical level. An expand-

Year-over-Year Change
ing technology presence in New York City, with Amazon, Google and Facebook opening sizable 39 3%

offices in the near future, will help continue diversifying the market’s economy. The new job
26 2%
opportunities will add to the metro’s extensive housing needs, both within Manhattan and across
the surrounding boroughs. While the market is poised to welcome new sources of renter demand, 13 1%
the pace of completions is moderating. Fewer units will open in 2020 than in any year since 2015.
0 0%
Though many apartments will arrive in Manhattan, Brooklyn will receive the largest share of 11 12 13 14 15 16 17 18 19* 20**
deliveries, as has been the case for the past three years. Across all five boroughs, reduced supply
growth will keep vacancy at a near-20-year low of 1.5 percent this year. Virtually full occupancy is
contributing to higher rent growth among market-rate units. That trend may be aided by declining Completions vs. Absorption
competition from new value-add projects as recently imposed restrictions have effectively halted Completions Net Absorption
the conversion of rent-regulated units to market-rate apartments.
32

New regulations foster uncertainty for a major segment of the investment landscape. The New

Units (thousands)
24
York multifamily market enters 2020 in a state of flux following the enactment of new legislation
governing rent-regulated apartments in June of last year. While the city remains an active commer- 16

cial real estate investment destination, transaction velocity declined markedly during the second
8
half of 2019, likely stemming from rent reform. Multiple avenues for converting rent-stabilized
units to market rates have been repealed and the financial feasibility to conduct capital improve- 0
11 12 13 14 15 16 17 18 19* 20**
ments has been hampered. Many investors of these assets will most likely have to reevaluate their
strategies. Some will shift their focus toward unregulated newer assets or properties with a mixed-
use component. Cap rates on trades completed since the legislation change have faced upward Vacancy and Rents
pressure largely driven by slackened buyer demand in the face of uncertainty.
Vacancy Rent Growth

8%

2020 Market Forecast 6%

Employment Education, healthcare, and technology hiring form the basis for a 65,000-person
up 1.4% payroll expansion this year following the creation of 75,000 jobs in 2019.
Rate

4%

2%
Construction Construction activity continues to trend down as about 3,700 fewer apartments
15,200 units will open this year compared with 2019. Development remains most active in 0%
Brooklyn and Manhattan. 11 12 13 14 15 16 17 18 19* 20**

* Estimate; ** Forecast
Sources: CoStar Group, Inc.; RealPage, Inc.; Real Capital Analytics
Vacancy Vacancy will remain unchanged at 1.5 percent as supply and demand maintain
New York City Sales Trends
no change virtual parity.
Average
John Krueger Vice Price
President/Regional Price Growth
Manager | Manhattan
Average Price per Unit (thousands)

260 Madison
$400 Avenue, 5th Floor New York, NY 10016 18%
Rent The average effective rent will climb to $2,833 per month, dipping from last (212) 430-5100 | john.krueger@marcusmillichap.com
Year-over-Year Growth

up 2.4% year’s 3.1 percent growth rate. John$300

Horowitz First Vice President/Regional Manager | Brooklyn
12%
1 MetroTech Center, Suite 2001
Brooklyn, NY 11201
Investment Institutions remain active in Manhattan and the western edges of Brooklyn and $200
(718) 475-4300 | john.horowitz@marcusmillichap.com
6%

Queens, while private investors are moving farther east to neighborhoods such Brooklyn Office
$100 0%
as Bushwick. John Horowitz Vice President/Regional Manager
1 MetroTech Center, Suite 2001 Brooklyn, NY 11201
$0
(718) 475-4300 | john.horowitz@marcusmillichap.com -6%
Metro-level employment, vacancy and effective rents are year-end figures and are based on the most up-to-date information available as of November 2019.
Effective rent is equal to asking rent less concessions. Average prices and cap rates are a function of the age, class and geographic area of the properties trading and Manhattan 10Office11 12 13 14 15 16 17 18 19*
therefore may not be representative of the market as a whole. Sales data includes transactions valued at $1,000,000 and greater unless otherwise noted. Forecasts
for employment and apartment data are made during the fourth quarter and represent estimates of future performance. No representation, warranty or guarantee, John Krueger Vice President/Regional Manager
express or implied may be made as to the accuracy or reliability of the information contained herein. This is not intended to be a forecast of future events and this is 260 Madison Avenue, 5th Floor New York, NY 10016
not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice. (212) 430-5100| john.krueger@marcusmillichap.com

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