NEW YORK CITY-Bad news for those industry watchers—and participants—who say the office market hasn't rebounded: the sector is back in full force. The Manhattan office property sales market reached $866 per square foot in the third quarter, according to new research from Colliers International. If 2013 closes at or above this level, it would register as the all-time highest single-year average price per square foot for Manhattan office property sales, the report states.
Additionally, assuming that momentum in the Manhattan sales market does not stall as a result of the political stalemate in Washington, DC, total transaction volume for calendar year 2013 has a chance of exceeding $20 billion, which would place the aggregate value as one of the largest office property sales years ever, second only to 2007, at $30.3 billion.
At the close of the third quarter, the Manhattan office property sales market registered 36 transactions totaling a robust $11.2 billion, with an average transaction size of $310 million. The flurry of activity was driven by multiple factors, the research states, including pent-up investor demand, record levels of available debt financing and equity capital, profit taking, and a low-interest rate environment.
The year-to-date Manhattan office property sales market has been dominated by core office properties, including the $1.36 billion, 40% sale of the General Motors building at 767 5th Ave. for $1,890 per square foot; the $858 million sale of a 49% interest in the News Corp. building at 1211 Ave. of the Americas for $900 a square foot, and the $385 million sale of 499 Park Ave. for $1,285 per square foot.
Another $5 billion of Manhattan office sales is under contract and expected to close by year-end, including the $694 million sale of a 49.5% interest in 7 Times Square for $1,170 per square foot, and the $725 million sale of 1345 Ave. of the Americas for $725 per square foot. Additional core properties are being marketed with the potential to close this year.
“Pricing for Manhattan office properties will continue to push towards record territory,” says James Murphy, executive managing director in Colliers International's investment services group. “Manhattan office rents have come back over the last two years, and investor confidence is at a five-year high. Investors are projecting continued healthy rent growth and are making investment decisions accordingly.”
The Colliers International research also shows that, year-to-date average Manhattan Class A property sales have averaged $990 per square foot, the highest all-time mark; average Midtown Class A property sales have averaged $1,123 per square foot, the highest all-time mark; average Midtown North Class A property sales have averaged $1,128 per square foot; and Manhattan office property sales have averaged $310 million, which ranks third all-time behind $446 million in 2007 and $413 million in 2008.
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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.
