Despite persistently high interest rates, New York City’s multifamily real estate market is experiencing a resurgence. Developers and investors are regaining confidence in the city’s political landscape, leading to a notable increase in transaction activity.

After a significant drop in late 2023 and early 2024, multifamily development site transactions across the five boroughs have rebounded. June 2024 saw a particularly strong wave of activity, with multifamily property sales reaching approximately $2.6 billion for the second quarter. This figure represents a threefold increase from the first quarter of 2024, according to Ariel Property Advisors.

The market’s revival can be attributed to two key political developments: Albany’s passage of a new housing deal in April and the progress of Mayor Eric Adams’ City of Yes plan. These initiatives have bolstered investor confidence and stimulated deal volume for both development sites and existing buildings.

Daniel Ridloff, managing director for real estate credit at Scale Lending, noted, “There’s a plethora of opportunities in many different New York City submarkets that are now looking for financing. All these projects that were shelved are now off the shelf.”

The multifamily market’s recent history reveals a volatile trajectory. In the second quarter of 2023, multifamily sales in New York City totaled $3.1 billion. This figure plummeted to $646 million in Q4 2023 before slightly recovering to $858 million in Q1 2024. The recent surge in activity, including notable deals like Breaking Ground’s $172 million Upper East Side acquisition, has driven the quarterly volume up by approximately 201%.

Helen Hwang, head of institutional investment sales at Meridian Capital Group, highlighted the impact of recent legislative changes, particularly regarding Good Cause Eviction. She explained, “Investors now understand how to underwrite deals,” due to increased clarity on the issue.

Two factors are driving renewed interest in development site deals: an extension of the expired 421-a tax break through 2031 for previously approved projects, and the introduction of the 485-x program as a successor to 421-a.

Despite these positive developments, challenges remain. Permit filings for new apartment units have continued to decline, with only 36 multifamily building permits filed in May 2024. However, Justin Pelsinger, chief operating officer at Charney Cos., sees potential in sites with 421-a extensions, noting an increase in broker activity for these properties.

As New York City’s multifamily market shows signs of recovery, industry players are cautiously optimistic about future growth and development opportunities in the sector.

Source: Bisnow