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Real Estate Capital Migration in NYC

NYC, Real Estate Developments

by Andre Benz, from Unsplash

As we discussed in an earlier blog about real estate investment from China, New York City has seen declining investment in real estate in the last couple of years and this has been matched by the growing net outflow of residents seeking more affordable pastures. However, it is important to note that despite New York’s position as a global city with huge flows of capital from abroad, the city is of course also part of a national ecosystem of real estate investment. Analysis by Marcus and Millichap suggests that last year, New York, as part of the Northeast, saw net outflows in real estate capital within this $9 billion market.

The Northeast, along with the West, experienced outflows while the US’s other regions experienced net inflows. Beyond these top-line figures, many investors have been making use of 1031-exhanges to exit the New York market, moving into places like New Jersey and Florida to take advantage of more favorable tax environments. Some observers expect this summer’s changes to rental laws in the city to precipitate further investment outflows along similar lines. In the national context, a cooling off of New York and California’s red hot real estate markets is hardly surprising, and an internal “rebalancing” of sorts is not inherently problematic. However, for NYC, the simultaneous outflow of investment from both domestic and international sources in recent times could prolong a stagnant market, a trend worth paying close attention to for both buyers and sellers.

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