High demand from both investors and renters and a continued tight supply of apartments has real estate brokers “bullish” about the multifamily housing market in Westchester County through this year and into 2008.
Cushman & Wakefield, in its fall multifamily overview for the county, reported an overall apartment vacancy rate of 2.9 percent as of the second quarter for 38,670 rental units. Company analysts said the apartment occupancy rate, which has hovered around 97 percent during the surge in homeownership over the past five years, is moving up toward the 2000 high of 99.9 percent.
With the rising demand, the average apartment rental rate in Westchester rose to $1,788 in the second quarter, a 2.2 percent increase. Monthly rental rates in Class A properties range from $1,500 to $2,000 for one-bedroom units, $2,300 to $2,900 for two-bedroom units and above $3,000 for three-bedroom units, Cushman & Wakefield reported.
The average Westchester rental rate rose 8.5 percent in 2006, following only slight increases in the previous three years. Rental rates this year continue last year”™s trend, said Jose R. Cruz, senior director of the capital markets group at Cushman & Wakefield of New Jersey Inc.
“The first six months of the year were higher than the last three years” for rent increases, he said. “I think ”™07 will be on par with 2006.”
Cruz said the high cost of a single-family home in Westchester ”“ a median price of $730,000 for an existing home ”“ “was more so a factor 12 to 18 months ago” in spurring demand for rental apartments here. “Now, I think it”™s more of a lifestyle choice for people. All in all, you”™ve got a huge amount of demand.”
“Westchester, given the public schools and infrastructure and retail and highway access and quality of the apartments, without a doubt it”™s a perfect location for a lot of people,” Cruz said. “When you look at it, Westchester comes up as one of the top two or three” living locations in the Northeast.
The county appeals to investors in multifamily housing, too. “You”™ve got so much demand in Westchester ”“ both users and investors,” Cruz said. “A lot of the larger institutions are light on Northeast multifamily in their portfolios” and looking to acquire properties in the county.
The Westchester apartment market, including Putnam, Dutchess, Rockland and Orange counties, could be on its way to “a banner year” in investment sales, Cushman & Wakefield analysts said. In the first six months, sales amounted to about 60 percent of the total volume in 2006. Five properties in excess of $10 million and comprising 1,215 units sold at an average price per unit of $140,866.
Â
Those regional apartment sales included:
·        Stone Ridge Manor, a 40-unit townhouse complex in Scarsdale, bought in March for $19.5 million by an anonymous Queens investor for condominium conversion.
·        Crystal Hill Club, a 168-unit luxury residential community in Pomona in Rockland County, acquired in March by AvalonBay Communities for $37.8 million.
·        Diplomat Gardens, a 108-unit complex in Piermont acquired in March by a private investor for $13.3 million.
·        Hudson Harbour, a 352-unit complex in Poughkeepsie, sold in April to AIMCO for $37 million.
·        Imperial Gardens, a 547-unit garden property in Middletown, bought for $63,551,597 by AIG Global JV Morgan Properties as part of an 86-property portfolio.
Cruz said condominium conversions “have taken a lot of product off the market in the last 24 months. There is a shortage of apartments in Westchester.
Cushman & Wakefield analysts said a steep decline in building permits for multifamily housing ”“ from a 10-year peak of 984 in 2002 to 293 in 2006, according to the U.S. Census Bureau ”“ will further tighten the supply of rental units in Westchester County.
“It can take five years to get approvals to build,” Cruz said. “Depending on the municipality, approvals are tough to come by in Westchester.” For a developer “to find a suitable location that works for apartments and to go through the process is difficult and time-consuming and costly. That keeps the demand high and it keeps the supply low.”
“Throughout the next few months and into early ”™08, demand for multifamily product will stay high” among investors, Cruz said. “Rents will continue to rise. Demand from the rental users also will remain strong. That”™s a nice mix for Westchester as a whole.”
Forty percent of the 344,000 households in the county are renters, Cushman & Wakefield reported. If that ratio holds along with a projected 2.2 percent increase in the number of Westchester households over the next five years, an additional 3,050 apartments will be needed to meet demand.
“Actually, we”™re bullish about Westchester,” Cruz said.
Â
