NYC Ranks Tops in Capital Market Investment

Source: Newmark Grubb Knight Frank

NEW YORK CITY—The Big Apple ranks number one in capital investment activity, investment sales volume and office space under construction in the United States. According to a first quarter capital markets report released by Newmark Grubb Knight Frank , New York City was tops in commercial investment activity, followed by in order of finish: San Francisco, Los Angeles, Boston, Washington, DC, San Jose, CA, Seattle, Miami, San Diego and Denver. New York City’s investment sales volume of $53.3 billion, easily bested second place Los Angeles, which posted $28.2 billion. Rounding out the top 10 were: Washington, DC, $24 billion; Chicago, $21 billion; Boston, $19.9 billion; Dallas/Fort Worth, $19.6 billion; Atlanta, $17.1 billion; Seattle, $15.3 billion; San Francisco, $14.4 billion and San Jose, CA, $13 billion. The report, authored by James D. Kuhn , president of Newmark Grubb Knight Frank, and Jonathan Mazur , managing director, research, NGKF, also puts New York City on the top of the list for office space under construction at 13.2 million square feet, besting Dallas/Fort Worth, which has 10.4 million square feet under construction. The remaining top 10 markets are: San Jose, CA, 8.78 million square feet; Washington, DC, 7.88 million square feet; Seattle, 7.84 million square feet; Chicago, 7.08 million square feet; Houston, 6.66 million square feet; Boston, 4.74 million square feet; San Francisco, 4.6 million square feet and Denver, 4.12 million square feet. NGKF calculates that office properties in Manhattan are trading 23.7% above the previous peak of $849 per square foot in early 2008. The brokerage firm also says that Manhattan trophy office sales have remained stable over the past three years and expects 2016 to be another strong year for trophy properties. New York City also ranked number one among major US markets in a number of other key categories: office cap rates (4.2% tied with San Francisco); multifamily cap rates (3.7%); hotel cap rates (4.9%) and retail cap rates (3.9%). The city also was tops in office rents at $56.34 a-square-foot; retail rents at $85.03-a-square-foot; office price-per-square-foot at $1,050-a-square-foot; hotel price-per-unit at $775,000 and retail price-per-square-foot at $2,331. NGKF says that capital markets fundamentals nationwide “remained relative strong through the first quarter of 2016 despite reduced activity in some major markets.” Office cap rates have enjoyed a slight uptick, although they remain below the 10-year national average, the brokerage firm states. Blackstone ranked first or second in every geographic region covered in the report over the last 12 months due to its high-ticket acquisitions of Stuyvesant Town, Willis Tower, BioMed Realty Trust, Strategic Hotels and Excel Trust. On the international front, Chinese insurers, such as Anbang and China Life have accounted for nearly $5 billion in capital investment volume in the US over the past 12 months. The report calculated that more than $85 billion in international capital has been invested in the United States over the past 12 months and that instability in global markets and low yields continue to drive foreign investors to commercial real estate assets in the United States. In fact, secondary markets have experienced increased investment from international buyers seeking higher returns.