New York is rolling out a congestion pricing plan for Manhattan along with a transfer tax on commercial properties priced for sale at $2 million and above. NY congestion pricing is set to start at the end of 2020, giving people in Manhattan time to make preparations. However, this one-two punch has NYC property investors seeing opportunities to increase their revenue.
Downward Pressure on Residential Markets
Before we get to the congestion pricing plan, we need to look at the transfer tax on property sales in NYC. The tiered tax rates on the sale of residential properties in NYC starts at 1.25 percent for properties selling at $2 million, and it caps off at 3.9 percent for sales of $25 million or above. This could potentially place downward pressure on residential property markets in NYC, causing a shift towards commercial rental properties with a high year-over-year yield.
Investment Strategies
With the rollout of these new plans, the most obvious strategy is the shift toward acquiring rental properties, or taking existing properties off the market and getting them ready for tenants. From apartments to storefronts, office space, and everything in between, analysts are predicting a shift to rentals over sales by next year, and NY property investors should be getting things in place to stay ahead of the curve.
NY Congestion Pricing and Properties
The details of the big NY congestion pricing plan have not even fully released yet, and local property investors know where the revenue will be. Parking garages are being eyed for acquisition or construction to generate revenue after the congestion pricing goes into effect. Additionally, those looking to renovate or expand rental properties, such as apartment buildings or office space, should consider adding parking garages as a way to not only attract and retain tenants, but to also offer a boost to revenue.
The Unknown
Without seeing all of the details of both the NY congestion pricing and the transfer tax, there are still a number of variables. A big question is how congestion pricing will impact parking revenue outside of the see zone. The other is if the market for property sales will keep moving along in spite of the tax. What we do know is that NYC commercial real estate investors should be forming contingency strategies.
Express Capital Financing provides funding for acquisitions, renovations, and construction throughout Manhattan and all of New York City. Contact our offices today to explore your options.
