Foreign Capital Dips, But Still Dominates NYC Sales Market

Four of the city’s six largest deals that closed in this year’s second quarter featured foreign buyers.

NEW YORK CITY—Foreign capital in the commercial real estate market here is still a major force, despite a drop in its market share so far this year. Brokerage firm Avison Young reports that foreign capital totaled 34% of all investment sales in New York City for the first six months of 2016, down from the record 41% posted in 2015. Despite the dip, the 34% market share represents the second highest percentage ever. In fact, four of the six largest deals in New York City that closed in the second quarter featured foreign buyers and accounted for 41% of the total dollar amount transacted in investment-grade sales in the last three months. “Foreign investors further demonstrated their preference for institutional properties this quarter, as foreign entities made up 50% of all institutional capital transacted this quarter, as opposed to just 16% for middle market properties,” Avison Young states in its report. “This is a continuation of a trend that began in the first quarter of 2013, and grew substantially in 2015 with the relaxation of FIRPTA requirements, which allowed for a freer flow of capital into the US.” The top second quarter sales included: Citigroup’s $1.76-billion purchase of 388-390 Greenwich St.; RXR Realty Joint Venture’s (other partners David Werner RE JV and China Life Insurance) acquisition of 1285 Ave. of the Americas for $1.75 billion and Olayan Group JV and Chesfield’s  $1.4-billion deal to buy 550 Madison Ave. Avison Young states that at present there is cautious optimism in the investment sales sector that after a record performance in 2015, the second quarter saw significant gains in total sales and sales volume over the first quarter of this year. The brokerage concern notes that many market observers had drawn parallels that the current market was looking more and more like the New York City investment market of 2007, which gave way to the 2008 market crash. “This has put 2016 investors on edge, anxious to see if history repeats itself,” the report notes. “However, while there has been a pullback in 2016 sales volume and transactions, it has not been the precipitous fall of 2008-2009—and given investor experience with recession and legislative action that has stymied many of the extraneous factors that led to the 2008 crash, little data suggest an impending recession.”   Disrupt or be disrupted. The industry is evolving into a new era that is forcing players to rethink their strategies, from brokerage to building and everything in between. Join us at RealShare New York on October 5th for impactful information from the leaders in New York CRE. Learn more. https://www.eiseverywhere.com//ehome/185352