Q4 Trend Report: Multifamily Investment Activity in New York City

Multifamily investment activity in New York City was strong through the first three quarters of 2022, mirroring a post-pandemic rebound across multiple sectors. In many corners of the city, record-breaking median rental rates observed in summer 2022 are showing signs of relief, but are still elevated beyond historical averages.  While analysts predict a strong showing in the early months of 2023, predictions beyond this are cloudy, at best.
 
Multifamily property owners and investors must take steps to ensure their buildings are in a prime position to capitalize on current market conditions, and maintain a competitive edge against similar assets.
 

Industry Focus on Tenant Experience

The pandemic forced multifamily property owners to adapt swiftly to lockdowns, remote work, volatile turnover, and a shift in tenant priorities. Owners and investors who worked with experienced rental property management companies were able to strike the right balance between achieving financial goals and enhancing the tenant experience to attract new tenants and retain those already in place.
 
According to proprietary data from J Turner Research, tenants are rating their rental experiences higher than years past. Coupled with positive lease renewal numbers, the data suggests that an industry-wide focus on tenant satisfaction helped reduce turnover despite the substantial increases in rental prices due to inflation and high demand. With this in mind, it’s increasingly valuable for owners to partner with a management company that offers in-house hospitality coaching programs that motivate and empower building staff to deliver a consistent  level of service.
 
The provision of amenities also has a major impact on a curb appeal. While amenity spaces reduce a building’s rentable footprint, they can drastically increase marketability and potential income from monthly rent. In today’s market, package rooms, outdoor space, and on-site coworking suites rival fitness centers as the most coveted amenity spaces. Buildings that do not provide a package room, for instance, command up to three percent lower rents than buildings that provide this amenity.
 
That said, major capital improvements are not always feasible. Outfitting buildings with virtual doormen or touchscreen intercoms, smart home systems that control temperature and lighting, or modernizing an existing laundry room are relatively low-cost upgrades that can help improve long-term curb appeal.
 

Investors See Opportunity in NYC

According to the Office of the New York City Comptroller, local rental prices have outpaced every other large city in the nation. Prices rose 19% in August compared to the previous year and were up 10.7% over the past six months. Surging consumer demand for rental properties is being driven by post-pandemic migration back to the city, recovering job growth, and high interest rates, turning would-be homebuyers into short-term renters. An influx of multifamily investment is also a contributing factor.
 
Total multifamily investment sales in New York City reached $22.1B in the first half of 2022, surpassing sales in all of 2020 and the first half of 2021. Much of this activity was driven by institutional investors taking advantage of favorable capitalization rates and average per-square-foot prices that are still lower than they were in 2019. Free-market properties were particularly attractive, comprising 75% of the nearly $9B worth of multifamily buildings sold. Perpetually low supply coupled with consistent consumer demand is likely to keep rental prices elevated, making these properties a possible hedge against inflation.  
 
As we move into 2023, individual and institutional investors will need to ensure their multifamily properties are in-step with trending expectations and well-managed to attract and retain the best tenants. However, with high interest rates and future rate increases on the horizon, it will be critical for owners and investors to assess internal inefficiencies, raise property value through capital improvement projects, and reduce operational and administrative costs.
 
For those planning deeper into the future, the city has acknowledged that it will require over 550,000 new apartments by 2030 to keep pace with anticipated population growth. The need for substantial new construction could represent further opportunities for individual and institutional investors looking to enter the market. Having an experienced building partner in place could help them understand the various design, operational, and legal complexities of planning and developing rental properties in New York City.
 
Multifamily investors and owners should consider partnering with a modern, full-service rental property management company like FirstService Residential to maximize occupancy and boost their bottom line. An experienced property manager knows how to enhance the tenant experience, develop sound retention strategies, and adjust quickly to evolving consumer preferences like wanting more luxury condominium-style services and amenities.  
 

For 40 years, FirstService Residential has guided a broad range of institutional and family-owned portfolios and individual building owners with our tailored management approach to significantly increase revenue, maximize occupancy and retention, and streamline operations.

The Multifamily Rental Division at FirstService Residential is the premier rental property management service in the nation and the only management company in New York with the requisite experience, knowledge, and scale to help owners optimize their cash flow, prepare for the clean energy transition, and provide the luxury lifestyle experience that attracts and retains tenants.
 
FirstService Residential relies on a proven management approach that enhances tenant outreach and retention and finds cost efficiencies in ways that no other rental management company can match. Owners and investors trust us more than anyone else because we have a track record of significantly increasing revenue and streamlining operations. 
 

We’ve helped building owners save millions in annual costs and services:

• Full-Service Accounting | A dedicated financial analyst is assigned to each building or portfolio to optimize your budget and eliminate unnecessary costs 
• In-House Compliance Department | Tracks violations and maintains established relationships with industry professionals to handle disputes and reduce potential fines 
• National Energy Aggregation Program | Our clients have saved millions of dollars in annual utility costs through our energy aggregation program, one of the country’s largest for multifamily residential buildings
• Amenity Consultation & Procurement | We advise our clients on the integration and utilization of well-known property technology and amenities to enhance the tenant experience 
• Rental Data Management & Accounting Platforms | Automated systems to make financial reporting more accurate, efficient, and timely
• Technology Investments for Process Automation | Automated lease renewal processes and improved data management ensure faster rent collection and deposit processing
• Construction Project Management | During tenant turnover or rental conversion, we determine the most cost-efficient renovation and cosmetic upgrades for owners to re-introduce the units at the highest market values
• National Scale & Buying Power | Our owners receive the highest quality vendor services at the most competitive rates given the size and breadth of our management portfolio

Whether working with an institutional investor or a family-owned portfolio, FirstService Residential knows how to protect your bottom line. We provide the expertise and stability to achieve sustained financial success and make rental property ownership easier and more profitable. When you work with us, you’re working with proven innovators and the most established name in luxury rental property management.