“Over the past 60 days we have started to see a notable uptick in the number of large, class A buildings being put on the market. The persistently low interest-rate environment, coupled with cap rates moving downward and improving rental rates have created a veritable 'perfect storm' for sellers,” comments Neil Helman, principal and a member of Avison Young's New York City-based capital markets group. “Many funds and REITs are now looking to sell as they feel the current environment is such that the returns they were seeking have or could be met with a disposition today.”

Adds principal Jon Epstein, who is also a member of the firm's capital markets group in New York, “In anticipation that current market conditions will continue to bode favorably for sellers of trophy properties, some large owners that are putting their buildings on the market now may be hedging risk by doing so, as we are still in the very early stages of this trend.”

The report offered some proof of that observation. Manhattan saw a significant decrease in international money coming into the investment sales market in the first quarter, according to Avison Young. That type of investing fell below its three-year average of 33% the report says. But there's good news: Avison Young predicts that the direction of international investment will begin to reverse itself, the announcement states, as more large owners—seeking to capitalize on current market conditions to chase yield—place trophy properties on the market.

Avison Young's research indicates that private equity firms are still the leading acquirer of office properties in New York City, while institutional investors and user-owners trailed in terms of acquisition activity during the first quarter. Recent activity shows that institutions are now net sellers of office properties and net buyers of residential.

Meanwhile, leasing is expected to soar, says Greg Kraut, principal and managing director of Avison Young's New York City office. “Although the improvement in the leasing market has been slow, it has also been steady, with sustained momentum likely during the second part of the year,” he says. “Aggressive sales pricing by property owners indicates that there continues to be strong demand for, and a comparatively limited supply of high-quality assets on the market, although that is changing as sellers increasingly begin to see the current market as an opportune time to achieve desired returns. This is also an indication that buyers believe leasing fundamentals are gaining strength.”

According to Avison Young, the problems that persistently low interest rates present for the market have yet to deter investment activity. “While the low interest rate environment has contributed to skyrocketing pricing, the problems that will be created by their inevitable increase still seem far off for most investors,” Epstein asserts.