"Investor interest in commercial real estate as an attractive long term alternative is prevalent," says Richard Baxter, executive managing director of Insignia/ESG's Capital Advisors Group. "There's a paucity of product available, financing options are rampant and inexpensive, and there's still very little new construction coming online."
Midtown saw the most of the activity, with 26 transactions totaling 26 million sf compared to 10.4 sf for all of 2001. And average prices through October of '02 are up 10% at $387 per sf, compared to a $350 average last year.
It was a much different story in Midtown South, where only six class B office building sales totaling 717,000 sf were transacted through October. In 2001, total footage sold was 1,106,141. But prices rose in the area, averaging $241 per sf this year compared to $200 a foot in '01, a 20% bump.
Trophy asset prices skyrocketed this year. In 2001, The Citicorp Center set the bar at $391 per sf. This year, 399 Park went for a staggering 1.06 billion, or $630 a foot, an increase of nearly 60%. And last month, 717 Fifth Ave. was sold for $266 million, or $611 per sf.
And investors are not buying properties just to turn around and flip them. Insignia found that buyers, on average, plan to hold office assets for seven to 10 years, rather than three to five, presumably putting faith in long-term economic growth.
"At a time when stock market prices are extremely volatile, many investors including pension funds, financial institutions, REITs, foreign sources and high-net-worth entrepreneurs are redirecting their focus to long-term positions in safer assets," Baxter notes.
Lower Manhattan has seen only three sales this year, for obvious reasons. 1.49 million sf of Downtown office space traded during the first 10 months of '02, for a total of $223.5 million. Last year, 15.5 million sf traded for $4.6 billion.
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