“With all those challenges, the fundamentals are steady,” she said. “New York is a unique market because it always finds a way to attract people and capital.” 

Manhattan leads growth in transactions

While the number of multifamily transactions in New York City was down year over year in Q1 2024, sales were up 23% year over year by dollar volume, according to the New York City Multifamily in Review Report by Ariel Property Advisors.  

Whether it’s a good time to buy depends on investors’ unique strategies and goals. 

Among New York City’s submarkets, Manhattan led the way in the first quarter, with increases in both the number of transactions and dollar volume, according to Ariel Property Advisors. Northern Manhattan also recorded an increase in transactions.

“Historically, Manhattan is the first borough to capitalize on a recovery. Trades haven’t picked up in Brooklyn, the Bronx and Queens yet,” Richartz said. 

Rent-stabilized assets remain in demand

Predominantly free-market buildings accounted for 60% of New York City multifamily transactions by dollar volume in the first quarter of 2024, according to Ariel Property Advisors. But a majority of transactions involved buildings comprising mostly rent-stabilized units.

“It shows there are still plenty of investors interested in acquiring rent-regulated properties in New York City, even with the Housing Stability and Tenant Protection Act (HSTPA) of 2019, inflation and interest rate increases,” Richartz said. 

Demand for workforce and affordable housing—often found at rent-stabilized properties—far exceeds supply in New York, supporting durable rents and vacancies. 

Rent-stabilized buildings’ values have likely declined since they last traded, Richartz said. But that’s less a reflection of the properties than the circumstances of the sale.

“The market expects some ‘forced’ sales of rent-regulated buildings as a result of investors who over-levered and weren’t able to absorb the impact of the HSTPA, interest rates, inflation and the regional banking disruption,” she said. “That could create opportunities for well-capitalized investors who are looking for long-hold assets.” 

Higher-for-longer interest rates

Interest rates remain elevated as the Federal Reserve seeks more signs of progress on bringing inflation back to its 2% target. 

While rate cuts could arrive in the second half of 2024, a reduction dramatic enough to meaningfully affect the market appears unlikely this year, Richartz said.

“However, we are in an environment where any reduction would be welcomed by investors,” she said. 

The uncertain trajectory for interest rates means investors seeking or refinancing apartment loans may want to consider prepayment options that would allow flexibility when rates decline.

Build reserves and liquidity

The challenges facing New York multifamily investors in recent years—from the interest rate environment to inflation to the COVID-19 pandemic—reinforce the importance of maintaining strong reserves, Richartz said. 

“Investors who have been successful in New York generally hold assets for a long period of time and are well capitalized to withstand black-swan events, which seem to be happening more frequently in recent years,” she said. 

Increasing liquidity also helps investors ensure they’re ready when opportunities arise.