Brooklyn Eagle Online Newspaper - 2008-10-06
by Linda Collins
BROOKLYN - The total number of building and investment property sales in Brooklyn dropped moderately during the first half of 2008, according to Massey Knakal Realty Services. This reflects the impact of the widely talked about "credit crunch," according to Massey Knakal's New York City Income Property Market Report, prepared by Miller Cicero, a commercial real estate appraisal and advisory firm.
The report found that the number of sales in Brooklyn between January and June this year were down 22 percent from the same period last year. The borough fared better than the citywide average (excluding Staten Island), which was down 31 percent from the same period last year. The turnover rate citywide during this period was 1.1 percent, down from 1.4 percent in second half of 2007. "We are encouraged that the market for medium-sized investment properties has not been as adversely affected as the larger institutional quality property sector," said Massey Knakal Chairman Robert Knakal. "Demand continues to be healthy and sellers are starting to adjust their expectations to meet current market conditions. "Given rapidly rising expenses in multi-family properties, investors are starting to rely more heavily on cap rate analysis rather than traditional GRM analysis.
The value of in-place income has increased recently and has made financing more feasible." The consolidated median price per square foot across markets declined to $222 per square foot, down 5 percent from the prior six month period. Accordingly, the median cap rate across all sectors inched up slightly to 5.8 percent from 5.5 percent from the prior period, and the gross rent multiple slipped from 12.4 to 11.5. In Brooklyn, cap rates fluctuated more, compared to the second half of 2007. Walk-up buildings had an average cap rate of 6.6 percent, up from 5.8 percent; mixed-use buildings had an average cap rate of 6.6 percent, down from 7.2 percent; and elevatored apartment buildings had an average cap rate of 5.5 percent, up from 5.3 percent. Highlights for the first half of 2008 include the following:
- Even with a 22 percent drop in sales, Brooklyn remained the most active sales market while its values stabilized.
- The number of sales declined 42 percent in the Bronx and values also declined; Queens saw the lowest sales decline and most stable values compared to the rest of the city; values were stable in Manhattan, with the number of sales down 36 percent over 2007; and Northern Manhattan saw the steepest drop in number of sales (63 percent) and values began to slide.
Median price per square foot and the number of sales were based on all closed sales in the public record over $500,000, as reported by Property Shark (www.propertyshark.com).
Cap rates and gross income multipliers were based on sales researched by Miller Cicero, in addition to properties sold by Massey Knakal Realty, and are thought to represent a reasonable sampling of all sales, according to Knakal.