The New York City Land Sales Market Is On Fire… Right Now – Trade Monitor

Issues have been uneven over the previous few years within the New York Metropolis funding gross sales market. Within the Manhattan submarket, south of 96th Avenue on the East Aspect and south of one hundred and tenth Avenue West, the height of this cycle was a number of years in 2014 and 2015. Since then, the market has been declining in gross sales quantity and, to a lesser diploma, property values.

When the pandemic hit in March 2020, the slowdown turned a quantity correction largely into a worth correction, and property values ​​started declining at a a lot steeper fee than quantity. It must be famous that this general suggestions pertains to the typical market and the way completely different and what every product kind has carried out.

It was not till the primary quarter of 2021 that an upward motion in property gross sales volumes and property values ​​was noticed. This upward stress was halted by the latest rise in rates of interest. Rates of interest are intently associated to mortgage charges, and mortgage charges are intently associated to cap charges. As rates of interest go up, mortgage charges go up and cap charges go up – and as cap charges go up, property values ​​go down. That is what we see out there proper now. The following assembly of the Federal Reserve is September 21, and one other 75-100 foundation level enhance is predicted.

JLL Investment Sales New York City land sales market Bob Canakal is on fire... right now
Robert Cannall. Photograph: JLL

Throughout all of the market volatility, the 2 brightest spots have been the multi-family building market and the land gross sales market.

Regardless of the political headwinds going through the multi-family market, residential rents are rising sharply. This upward stress on rents helps enhance purchaser demand.

Within the land market, exercise has been accelerated by the consensus that inflation and better charges are dynamic within the brief time period, and three to 4 years from right now, when what’s being purchased for building is rolled out on-line, broader financial indicators might be again to comparatively regular ranges. This land market exercise is one thing we observe intently as a big a part of our enterprise revolves round land gross sales.

If we glance intently on the land market, the height when it comes to values ​​occurred in 2015 and 2016, the one two years during which common land costs exceeded $600 per buildable sq. foot: $601 in 2015 and $662 in 2016. Which is unprecedented. register. Since then, values ​​have trended decrease via 2021, reaching a cyclical low of $427 per buildable foot. Surprisingly, the values ​​didn’t decline in 2020, when the pandemic appeared to have had its best influence. Given the lag between contract signing and shutting, this final result just isn’t totally surprising.

Through the first half of 2022, the typical worth of land in Manhattan rose to $444 per buildable foot. Given {that a} important enhance in rates of interest is barely a really latest dynamic, we count on land costs to say no within the second half of 2022. It is going to be attention-grabbing to see how the 2022 common compares to the 2021 common.

Whereas a worth comparability between 2021 and the primary half of 2022 reveals a modest 4 p.c enhance, the opposite metrics we observe for the land market are doing a lot better. For instance, greenback gross sales nearly doubled in 2021 to $1.375 billion from $771 million in 2020. The 2020 whole was the bottom going again to the $293 million whole in 2010. Within the first half of 2022, greenback quantity was the bottom. Roughly $1.5 billion, at a tempo of $3 billion or up 103 p.c from final yr.

When it comes to buildable sq. footage bought, the cyclical decline was in 2020 when just one.4 million buildable toes have been traded. In 2021, this may enhance to three.68 million buildable sq. toes, and in 2022, the tempo over the primary half will lead to 5.3 million buildable sq. toes being bought. If achieved, this is able to be a 46 p.c enhance over 2021.

Lastly, when it comes to the variety of growth websites bought, the periodic low level was additionally in 2020, when solely 22 websites traded. In 2021, that quantity elevated to twenty-eight. Within the first half of 2022, 21 websites have been bought, a median of 42 websites for the yr or a projected 50 p.c enhance over final yr.

Every of those will increase bodes nicely for medium-term optimism. Nonetheless, the anticipated slowdown attributable to greater rates of interest is prone to result in the much less strong will increase reported on the finish of the yr.

Robert Kencal is Head of Funding Gross sales in New York JLL.