NYC Investment Sales Sink Back to Bottom

Uncertainty and mixed signals continue to rule the day, and we’re not talking about the New York Giants’ football offense.

The trajectory of commercial real estate transactions in NYC also has been sacked behind the line of scrimmage in recent days, quashing any hopes that a second-quarter rally would lead to a year-end victory celebration.

After surging to $2.8B in the second quarter, NYC CRE transactions returned to what we were prepared to declare a bottom: the first-quarter total that now is also the third-quarter total of $2.2B, according to Avison Young data.

The paltry amount, a 21% drop from the Q2 total and a 41% drop below the trailing four-quarter average, would appear to ensure that the year-end 2023 total for real estate deals in the Big Apple will be less than $10B, the worst showing since the Great Recession in 2009.

To put that in perspective, that’s less than a third of the historical 10-year average of $34B.

Manhattan registered 60 trades in Q3 with a dollar value of $1.5B, a 7% drop from the second quarter and 40% lower than the previous four quarters. Manhattan’s multifamily trades produced about $675M in sales, with average cap rates rising 12 bps to 5.18%, according to Avison Young’s data, first reported in Bisnow.

The largest multifamily deal in Manhattan in Q3 was NYU’s $210M purchase of 377 East 33rd Street from Verbena Road Holdings; the second largest multifamily trade involved Related Cos. sale of 130 West 15th Street to the California Public Employees’ Retirement System and Pacific Urban Investors for $183M.

In NYC’s beleaguered office market, only seven deals closed in Q3 encompassing a total of about $208M, a 65% cliff-dive from the trailing four-quarter average. Kaufman Investments and Beacon Capital Partners had the most expensive deal, paying $92M to acquire 875 Sixth Avenue.

Retail was the outlier to the overall malaise, with about $341M in sales, triple the trailing four-quarter average. A total of 17 trades in Q3 had an average price per SF of $1,608, a 36% increase, according to Avison Young data.

Meanwhile, office valuations in Manhattan continue to drop. Earlier this month, the sale of a century-old 20-story office building in Midtown South set the latest benchmark approaching a 50% discount.

Sovereign Partners are in contract to buy 100-104 Fifth Avenue for $125M from Clarion Partners in an all-cash deal. The sale price is nearly half the $230M that Clarion paid for the property a decade ago. Clarion bought the 270K SF building in 2013 for about $800 per SF and is selling it in a deal that translates to roughly $450 per SF, TRD reported.

The Q1 2023 total of $2.2B in NYC commercial real estate investment sales, which involved 108 properties, was a 59% decline across the trailing four-quarter average and a 53% decrease from Q4 2022.