If there’s one borough of New York City that is often associated with urban blight, it’s probably the Bronx. In recent years, however, it’s become another striking example of urban renewal in the United Stands. Real estate prices continue to rise, albeit with slowing velocity, throughout the city, and throughout the country, for that matter. But the Bronx, starting from a lower baseline than the other boroughs, seems to be maintaining its stride. There’s a lot going on up there in the only borough on the U.S. mainland, and there’s a lot more likely to happen in its multifamily real estate market in the years to come.
Proximity and Paradox
A combination of four East River bridges and tunnels connect Manhattan to Brooklyn, and another five connect to Queens. But there are 11 spans over the Harlem River that cross between Manhattan and the Bronx, and some of them are shorter than a football field. And yet it’s a world away. The two counties separated by such a thin ribbon of water have almost the same population, yet the Bronx’s average household income is literally half that of Manhattan, and average monthly rents are little more than one-third.
When most people think of the Bronx, they think of the South Bronx. That’s the area closest to Manhattan, it’s where the Yankees play and it’s where local TV crime reporters have become part of the streetscape. Its grittiness has been showcased by film makers and authors including Spike Lee and Tom Wolfe to name a few. But reality is less clearly delineated than film or literature, and the South Bronx is far more complex. The “South Bronx” has become a metonym for “the blighted areas of the Bronx” rather than a specific geographic region — like “Wall Street” refers to the New York financial industry more often that it refers to a specific stretch of pavement in lower Manhattan. It’s hard to name a part of the South Bronx that isn’t dealing with some form of socio-economic issues. Nonetheless, it is exactly those issues that make the region ripe for renewal, and builders have not been shy about moving their equipment along the riverfront. In fact, 27% of New York City’s approved permits for the first half of 2018, the latest statistics available, were in the Bronx, and mainly in exactly those neighborhoods that the 21st century economy — and about half the 20th century economy — left behind.
“The building boom is especially prevalent along the South Bronx waterfront,” according to reporter Devin Gannon at 6sqft. “The neighborhood of Melrose ranked third, just under Long Island City and East New York, for the most authorized permits” from July 2017 to July 2018. The New York Post concurs. “The southwestern edge of the Bronx is getting ready for a skyline-shifting series of commercial redevelopments,” according to real estate writer Lois Weiss. “Dotting the bottom of the borough — along the narrow Bronx Kill channel between the Bronx and Randall’s Island and running east into the Port Morris area — are notable conversions.”
Beyond the 6 o’clock News
When people say “the South Bronx,” they really ignore much of the area east of the Bronx River. True, Parkchester, Clason Point and adjacent areas face the same struggles as their neighbors to the west and are little better off financially. Still, such perfectly viable communities as Pelham Bay, Throgs Neck, Schuylerville and Country Club thrive as middle or mixed-income neighborhoods.
Meanwhile, prosperous neighborhoods spread out north of Pelham Parkway. East of the river, City Island stands out as a redoubt of marinas and antique shops. Nearby Co-Op City is hard to miss: Its 35 high-rise multifamily structures rise above surrounding Baychester and comprise the largest single residential development in the country. Deliberately middle-class, Co-Op City residents must have no felony convictions, a credit score of at least 650 and an annual household income in the range of $25,000 to $156,000.
West of the river, the North Bronx has neighborhoods which skew even further upscale. Kingsbridge and Riverdale offer particularly attractive addresses, as does Marble Hill, which is technically part of Manhattan. It used to be unquestionably part of Manhattan, but then public works projects in 1895 and 1914 disconnected it from the rest of the island and reconnected it to the mainland, respectively. So it’s more or less part of the Bronx, but falls under the authority of New York County rather than Bronx County.
Room to Rent
Of all the places in the United States with populations exceeding 50,000, the Bronx has the highest percentage of renters. And yet, the Bronx continues to fly under a lot of radars. A recent Marcus & Millichap brief on the New York multifamily market doesn’t even mention the borough. The New York-centric Ariel Property Advisors, though, takes a more locals-only view. According to its January 2019 report, more than $2 billion were invested in new development in the Bronx last year, more than half of it in those South Bronx neighborhoods that are in the most desperate need. “The multifamily asset class once again served as the driving force for the Bronx investment sales market, totaling 59% of the borough’s dollar volume and 56% of the transaction volume in 2018,” according to the Ariel report.”[T]he Bronx multifamily market posted 176 transactions that took place in 2018, representing a 19% increase year-over-year. Property volume followed the upward trend due to multiple portfolios trading hands, for a total of 288 buildings sold, which correlates to a 33% increase since the prior year.”
The report notes that much of this new construction is concentrated in the South Bronx neighborhoods of Mott Haven and Longwood, as well as the less well-heeled sections of the Northwest Bronx: Fordham, Norwood and Belmont. Much of this is directed at providing affordable housing, which we discussed in our article on Queens. While Ariel strikes a tentative note that the City Hall’s emphasis on this market could represent “headwinds” for real estate investors, their report concedes that almost 35,000 new affordable units were built in the Bronx between 2014 and 2018, and that this is on track with Mayor Bill De Blasio’s goals.
Bronx at a Glance
- Average monthly rent: $1,694 and steady
- Average multifamily unit sales price: $185,436, up 5.6% year-over-year
- Multifamily cap rate: 4.94% and steady
- Multifamily gross rent multiplier: 12.08, up 1.6% year-over-year