In periods of economic stability and growth, emerging real estate markets can potentially deliver outsized returns. However, in periods of volatility, we believe top-tier metropolitan areas like New York City, Los Angeles and Miami are best positioned to weather the storm.
NYC has a track record of being one of the best real estate investments in the nation.
Among metropolitan areas, NYC remains the country’s largest real estate market by value at $3.51 trillion, according to data published by Zillow. Despite being one of the hardest hit by the COVID-19 pandemic, NYC bounced back from the economic effects of the pandemic relatively fast. Low inventory and strong buyer demand continues to drive up prices, with multiple offers on a limited number of homes becoming a common occurrence in the majority of NYC submarket segments.
Tier I markets tend to experience consistent investment volume year-over-year due, in part, to the following:
- Consistently rising rent prices
- Strong economic and employment fundamentals
- Large populations combined with limited housing creates opportunity
As a result, deep-pocketed and risk-averse institutional investors will be part of the competition for Tier I opportunities.
The expiration of the 421a tax break for New York City multi-family developers is expected to slow the pace of new development for the foreseeable future as returns for new buildings are diminished, further driving demand and prices for existing properties.
We are seeing a trend of private equity firms continuing to bet big on New York apartments, reiterating sentiment that the market has the potential to outlast any downturn. In September, Blackstone Group agreed to buy a Frank Gehry-designed apartment tower in the Financial District for $930 Million while KKR spent more than $1 billion in a span of two years to become one of the biggest owners of newer tax-exempt apartment buildings in Brooklyn. And this keen interest in New York apartments is not anything new. Blackstone has owned the 11,000-unit Stuyvesant Town complex on Manhattan’s East Side since 2015 and before its Brooklyn shopping spree, Carlyle Group already owned the rental tower 1 QPS in Long Island City and the 43-story Ritz Plaza north of Times Square.
Investors now have access to own in New York City with our Chelsea Multi-Family Equity offering. The sponsor plans to upgrade three pre-war buildings in the desirable neighborhood of Chelsea, increasing rent prices and the building’s valuation.
All securities involve risk and may result in significant losses. Alternative investments involve specific risks that may be greater than those associated with traditional investments; are not suitable for all clients; and intended for experienced and sophisticated investors who meet specific suitability requirements and are willing to bear the high economic risks of the investment. Investments of this type may engage in speculative investment practices; carry additional risk of loss, including possibility of partial or total loss of invested capital, due to the nature and volatility of the underlying investments; and are generally considered to be illiquid due to restrictive repurchase procedures. These investments may also involve different regulatory and reporting requirements, complex tax structures, and delays in distributing important tax information.
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