There has been much talk about the recent decline in the New York City property sales market. Based on Cushman & Wakefield 1H17 report, the dollar volume of sales dropped a staggering 43 percent citywide compared to last year for an annualized $32.9 billion. Manhattan was even more dramatic with a decline of 50 percent.

If it is any consolation, the number of sales was only off by 14 percent citywide for an annualized 3,756. The disconnect between the sales volume decline can be explained by the average sales price dropping to $8.8 million versus last year's $13.2 million. Most noticeably, there were only two billion dollar plus sales compared to 2015's record year when there were ten.

Regardless of this decline, what is most important to remember when considering sales reports is that it is a trailing indicator. The typical sales contract may take 2-3 weeks to negotiate. Once signed, a typical closing can take up to 3 months. It could be another month by the time the transfer is reported and picked up in our report. Therefore, sale statistics are a result of negotiations that took place 4-5 months ago.

With this in mind, it is not surprising that our first half of the year was so far off. We have seen major declines in the first half of the year following a Presidential election. In 1H13, sales volume was down 33 percent; whereas 1H09 was down 82 percent. The first half of 2013 was immediately following the mass selloff in 4Q12 due to the rising capital gains rate, while 1H09 was in the depths of a recession. When compared to these post-election years, a 43 percent decline does not seem too out of line.

At the start of this year, there was a tremendous amount of uncertainty as a result of a divided nation following the election of President Trump and some of the drastic measures proposed by his administration. When there is uncertainly, sellers and buyers tend to wait on the sidelines to see what transpires.

This is certainly not to undermine some of the real challenges in the market which particularly paralyzed the development and retail sectors. With the lack of construction financing and tax abatements, land sales came to a halt. The effects of E-commerce and the corresponding vacancy rate for major retail corridors, similarly had a major impact on retail sales.

That all being said, residential and office fared well, as their respective vacancy rates and rents remained stable. However, we are keeping a close eye on concessions, such as the free rent and TI which are required to achieve some of these leases.

Meanwhile, interest rates are still near historical lows which are making cash on cash returns very attractive. When coupled with expanding cap rates, it is offering investors returns which they have not been seen in this current cycle. Although the cap rate movement is not drastic, it has shown that investors are demanding more yield today. Citywide cap rates across all asset classes increased from 4.48 percent to 4.58 percent, while Manhattan cap rates increased from 3.72 percent and 3.94 percent. Even for some credit retail in Manhattan, we are now seeing mid-4 percent cap rate opportunities. Lastly, there is a spread between Class A office cap rates and the 10-Year Treasury that we have not seen since 2002 which is now at 2.94 percent.

Despite the decline in volume in 1H17, pricing edged up again to all-time highs where the citywide average across all asset classes is now at $570/SF, a 7 percent increase over last year, whereas Manhattan hit $1,483/SF, a 2 percent increase. These statistics may be a bit misleading, as we tend to see sale pricing continue to increase when volume drops, because sellers who did not achieve their prices elected not to sell. In 1H13, even with a 33 percent decline in sales, pricing went up for walk-ups, mixed-use, retail, hotel, and office. 1H09 was the obvious exception where pricing fell much more drastically.

One thing holds true that following the past two Presidential elections, there was a big run up in sales activity and pricing in the years that followed. Sales volume more than quadrupled from 2009-2012, while prices surged 26 percent. Meanwhile, after 2013, pricing has risen 47 percent to today while dollar volume from 2013-2015 more than doubled.

We have already seen signs of life back in the market. Our team signed three sales contracts in August alone, which is equal to our performance in the entire first quarter. We find contract executions to be the best indicator of activity in the market as it is real time. Closings, which again are a trailing indicator, look like they increased from June to July meaning that this trend may already be reversing. Also, we are once again witnessing bidding wars especially on multifamily assets.

The boroughs continue to provide for huge upside potential. The average apartment building in Manhattan now sells at over $1,000/SF; whereas Brooklyn is around $400/SF, Queens around $350/SF, and the Bronx at $200/SF. This means that prices in the borough are still well below replacement cost.

Finally, one of the biggest reasons to remain optimistic is job growth which is the biggest driver for our market. Over the last three months, both the U.S. and New York City have seen unprecedented growth. In fact, New York City added 53,800 job from May through July this year, the highest three-month period since 1980. It is no surprise that Hudson Yards has already signed 6.5 million square feet in new office leases. Residential and retail demand will follow to support these areas. With this all in mind, savvy investors will not want to miss another run up which could happen in the years that follow.