Overall Market
During the 1 st quarter of 2020 we began to see strong demand from investors to re-enter the Bronx Multifamily Market. Due to pro-tenant rent reform passed in June of 2019, a lot of Investors felt the market had already corrected itself over the 3rd and 4th quarter of 2019. Increased cap rates and very low interest rates sparked investor demand for rent stabilized buildings and reinstilled confidence that Bronx Rent Stabilized Buildings were a great place to invest. This was evident by the 142% increase in Bronx Multifamily sales transactions from 4th quarter 2019 to 1st quarter of 2020.
Towards the end of the 1st quarter of 2020 Covid-19 began to create issues for the economy and commercial real estate market. Although the market has slowed down during Covid-19, transactions that had already started before the pandemic continue to move forward to the closing table and demand for multi-family buildings is still strong.
Available Financing
In the beginning of the quarter there was a drop in interest rates making it very attractive for investors looking to lock into cheap capital. Interest rates ranged from the high 2% to low 3% range for multifamily properties. Towards the end of the quarter, Covid-19 created a sense of uncertainty on how to value properties in the short-term causing credit markets to tighten. Some lenders have hit the brakes on new loans while others continue to lend at increased interest rates and debt service requirements.
A Bumpy Road with Guardrails
Rent collections started to become a big concern for landlords in March around the start of Covid-19. With the economy starting to slow down from the effects of Covid-19 and unemployment numbers starting to increase we believe this will be an area of concern over the next 90 days. Lendersacknowledged this as a big problem for landlords and are offering mortgage deferral options for up to 90 days.
The government has stepped in during the last couple days of the quarter by passing the CARES Act which provided $2 trillion worth of economic relief to the economy. The SBA Economic Injury Disaster Loans and the SBA Paycheck Protection Program (PPP) are just some of the programs available to small businesses. If you would like to know more about any of these programs and the potential benefit to you, contact us for more information.
We anticipate the “shelter in place” order to be lifted in late April and life to slowly return to normal over the 2nd quarter of 2020. During this time credit markets will begin to return to pre-Covid19 levels and transaction volume will resume.
If you have any questions or would like to discuss please call us at 914.300.4444.
Thank you,