NEW YORK CITY-After a surge of activity in the fourth quarter—due to pent-up deals getting rushed into closing by year-end—investors should expect to see minimal activity in the city's commercial real estate market during the first and second quarter of 2013, Barbara Byrne Denham, chief economist at Eastern Consolidated, tells GlobeSt.com.
“The high level of activity in 2013 will take away activity in the first two quarters of this year,” she says. “It's a very volatile pattern.” Overall, she predicts growth of approximately $6 billion in this first quarter and the same amount in the second quarter.
In particular, office rental and the retail sectors will lag, says Denham. “The office leasing market is still not very strong because it's very Wall Street driven. Retail was off the chart in the fourth quarter, but that won't continue because it's the most volatile sector.”
However, she had good news to share too. “Retail is a growing asset class. And multifamily will continue to be strong because people still feel that housing in the New York market is strong.” Other sectors, Denham says, “will be proportionate to their usual role.”
The market watcher is coming off the release of a report on the fourth quarter, in which she announced that the volume of commercial property deals soared to about $12 billion at year-end, more than double the $5.8 billion that was transacted the previous quarter.
While results are preliminary, as many transactions were not recorded by December 31, the report shows that the number of commercial property sales totaled 345 deals, up from 318 in the third quarter, showing how much demand soared as buyers competed to close deals before falling off the fiscal cliff that was nervously anticipated. The spike also drove up prices, Denham notes in the announcement of the report.
Among the research's other findings, retail property sales accounted for more than $2 billion in dollar volume in 2012's last quarter, up by an astonishing 613% from Q3 2012's $285 million, and beating out a previous high of $780 million in Q2 2012.
Yet, other sectors grew by even larger numbers in 2012. Multifamily property sales doubled from $1.6 billion in the third quarter to $3.3 billion – making the final three months of the year the highest quarter since 2007's second quarter.
The volume of hotel sales nearly doubled in the quarter, from $380 million in Q3 2012 to $665 million in the fourth, while office property sales held steady, accounting for $2.8 billion in volume, which is consistent with the last four quarters of volume, Denham says in the report.
Several sizeable deals were done at the end of the year, the research notes. Publicly-traded REIT Vornado Realty Trust paid the highest price on a retail buy when it acquired the retail space at 666 Fifth Avenue for $707.8 million—or more than $6,000 per square foot. The largest multifamily deal was TIAA-CREF's purchase of a 70% stake in the residential portion of the MiMA, at 460 West 42nd St., from the Related Companies for $551.2 million. TIAA-CREF also bought a 49% interest in the residential portion of New York by Gehry at 8 Spruce St. for $514.5 million from Forest City Ratner.
Meanwhile, the biggest office sale was for 575 Lexington Ave., which was purchased for $360 million through a joint venture of Silverstein Properties and the California State Teachers' Retirement System, a pension fund. The largest hotel trade was Rockpoint Group's and Goldman Sachs' purchase of the Times Square Hotel from Starwood for $275 million (or $413,530 per key). The volume report for the fourth quarter also includes the hotel condominium sale at the Plaza, which was part of a multi-condominium sale.
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
