Fourth Quarter Bronx Benchmark Review

409 W261st St, Bronx NY 10471

Relaxing interest rates in the fourth quarter brought a hopeful thaw to the historic 2023 freeze in The Bronx real estate market. Valuations have held up thus far, but fewer marquee deals and more distressed sales are working their way through the averages. The scarcity of residential properties has boosted some of our benchmarks, although commercial apartment valuations continue to weaken. We see fewer land transactions above our benchmarks, and more below. Other commercial valuations have held steady among a wave of distressed sales.

Total transactions in the fourth quarter were 25% fewer than the prior year, which is better than the 42% decline for all of 2023. As we hope for a return to normal, it’s with apprehension about what the market clearing prices will look like. Leasing activity remains healthy with a slight cooling at the top of the retail market and enduring strength in industrial rents.

We employ a qualitative analysis of public and proprietary sale and lease data to construct our valuation benchmarks. Our process filters out related party transactions and anomalous data and gives you a true view of the market. In this time of unusual stress and low sales activity, following are the latest updates to the valuation benchmarks.

Residential Sectors

1925 Radcliff Ave, Bronx NY 10462
Single Family house at 1925 Radcliff Ave in Morris Park sold for $770,000 on November 22, 2023, $415/sf.

Most available supply of Single Family homes continue to sell quickly. Some deterioration in our Bronze averages in December might reflect heightened foreclosure activity or general stress in the lower end markets. The fourth quarter average remains slightly above our Bronze benchmark. Our Silver category was strong enough in the fourth quarter to warrant raising that benchmark to $400/sf, which is also below recent averages. We saw Gold level houses trade below our benchmark in December, but the fourth quarter average came out slightly above our unchanged level.

The bread and butter of The Bronx real estate market are multifamily properties with less than 5 units. They comprised almost half of all 2023 transactions. Hundreds of deals support our unchanged Bronze benchmark values. Scarcity continues in the Silver and Gold categories where we raised our square footage benchmarks to $325 and $425 respectively. Unit valuations are unchanged.

Single Family

Asset ClassPrice / SF
SF Bronze$275
SF Silver$400
SF Gold$600

2-4 Unit Multifamily

Asset ClassPrice / SFPrice / Unit
MF Bronze$250$300,000
MF Silver$325$325,000
3211 Paulding Ave Bronx NY 10469
Three Family at 3211 Paulding Ave in Williamsbridge sold for $900,000 on December 7, 2023

Commercial Apartments

A myriad of problems persist in the commercial apartment categories. The NYC Rent Guidelines Board didn’t get their recommended increases in stabilized rents and the 2019 rent control law continues to wreak havoc on landlord returns. Certain inflation categories have cooled but insurance and regulatory compliance expenses continue to soar. Average valuations have plummeted by almost half over the past year as buildings under financial and regulatory stress represent an increasing share of sales. If you don’t have to sell your apartment building right now, you probably want to wait.

5421 Sylvan Ave, Bronx NY 10471
24 well maintained units at 5421 Sylvan Ave in Riverdale sold for $3.75 million on October 26, 2023. $200/sf and $156,250/unit

We don’t want our benchmarks to chase declining averages skewed by unusual circumstances, but the market is declining even without forced sales. Providing workforce housing in New York City is no longer the profitable enterprise it has historically been. These times call for opportunistic investors to seize on distressed valuations and hope for improving fundamentals. The only way for New York City to get the increased housing that it needs is to incentivize the market.

Unfortunately, the recent incentives are all to sell. A wide disparity of valuations make simple averages less relevant so we examine every deal. We can’t always discern the reasons for deep discounts or generous premiums, so we base our benchmarks on the middle of the market.

Despite a wave of deals below each level, we feel the Elevator Apartment benchmarks still reflect the true market for typical assets. The premium in Walk Up Apartments has faded away so we trimmed that price per unit benchmark to be in line with the Elevator Apartment category. Without a trend reversal, all the Commercial Apartment benchmarks will have to be reduced further.

Commercial Apartments

Asset ClassPrice / SFPrice / Unit
Elevator Apartments$200$150,000
Walk Up Apartments$200$150,000

Other Commercial Sales

The hot Industrial sector cooled off in the fourth quarter with a handful of below benchmark deals. Higher long term averages and improving lease rates support the current benchmark for now.

It was a similar story in Mixed Use where November and December transactions were below benchmark levels. We’re not seeing the strong trades that support the averages. There might be too many forced sales in the mix, so we are maintaining the benchmark at the current level.

It was the opposite story in Retail with several premium deals late in the year. This is the rare case where we see upward pressure on the benchmark.

There were two fourth quarter Office deals on either side of that unchanged benchmark.

The Specialty sector saw several parking lots with minimal square footage in the sales mix. Not many sold at high land valuations, that benchmark also remains unchanged.

We lowered our range of vacant land values to reflect the lack of four digit deals and a preponderance of sales below the benchmark. Without a replacement for 421(a), the developers are waiting for better opportunities.

Asset ClassPrice / SF
Mixed Use$300
Asset ClassLow P/SFHigh P/SF
Vacant Land$50$1,000

Bronx Commercial Lease Rates

Leasing activity in The Bronx remains healthy across sectors, perhaps a function of tight financial conditions forcing some buyers to rent.

Retail leases are being signed around our benchmarks, but we trimmed the gold level to reflect a lack of marquee deals above that value.

Office leases can also be found below our benchmark but the best properties in each class are signing leases at benchmark rates.

We raised our Industrial Lease benchmark to reflect a handful of above benchmark deals signed before year end. It remains slightly below its trailing averages.

Gross lease Benchmarks

Asset ClassPrice / SF
Retail Bronze$50
Retail Silver$55
Retail Gold$60
Office Bronze$30
Office Silver$35
Office Gold$40

Light At the End of the Tunnel

We may see the light of recovery, or it could be an oncoming train. Some of the biggest and smartest players in the Office sector recently announced fund launches to capitalize on the depressed valuations. SL Green CEO Marc Holliday called the bottom of the New York City Office market. They have seen rising rents in their properties and are launching a $1 billion fund to buy Office property debt. RXR is returning to its Office roots with another $1 billion fund and Goldman Sachs announced a $2.6 billion fund launch.

Some of the smartest players in the NYC Office sector may see unique opportunities, or they may want to support the prices of their current portfolios, or they may need to raise funds to roll their own debt. We’ll take the less cynical and opportunistic view and hope their bets pay off.

Please make sure to consult our Valuation Benchmarks before you make any bets in The Bronx real estate market. Also check out our other content to make you a better Bronx real estate investor.

Please use our comments section below to share your thoughts, or use our Contact function if you have any questions about The Bronx real estate market

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Featured Image: Three Silver grade units sold at 409 W261st St in Riverdale for $1.36 million on November 17, 2023. $316/sf and $453k/unit.

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