NYC Investment Sales Rise for 2nd Consecutive Quarter

New York City investment sales volume for the second consecutive month has experienced quarterly growth, rising 3.2% from the first three months to $5 billion. Renewed demand for retail assets and multifamily development sites, as well as distressed office, drove the increase, Cushman & Wakefield said in a Marketbeat Capital Markets report.

Even as dollar volume rose, the number of transactions and the number of properties sold in the second quarter fell 14.7% and 10.8%, respectively, highlighting “the prevalence of big-ticket sales by larger buyers and/or end users,” Cushman wrote.

Year-to-date, NYC investment sales volume fell by nearly a third to $9.76 billion.

Transactional momentum remained “sluggish,” Cushman said. The brokerage expects 2,380 properties to trade hands by year-end, 19% less than in 2023.

RETAIL

Buyer confidence in the retail sector has pushed retail pricing up 15.1% this year to $801 per square foot, the highest average since 2019, as the sector undergoes significant growth in investment demand and values, Cushman said.

Retail investment sales volume has topped $500 million in the last four quarters, “a figure not reached in any of the four prior quarters.”

The sector is also benefiting from a “spotlight,” as luxury retailers such as Prada and Kering have made high-profile purchases,” Cushman added.

DEVELOPMENT

While development pricing has seen limited growth – the opportunity is there.

“The introduction of 485-x, a new tax exemption program for housing production, has revitalized the feasibility of new residential projects” and driven a “considerable increase in sites sold across nearly every market,” Cushman said.

The fact that citywide development pricing has not risen in five years has created “newly underwritten opportunities and value-driven potential” for developers.

OFFICE-TO-RESI CONVERSIONS

Even as demand for multifamily properties remains weighed down by a lack of local policy improvement, transactions driven by office-to-residential conversions are coming to fruition.

In the second quarter, Manhattan saw three office-to-residential transactions, trading at an average of $373 per square foot, one-fourth less than the “historically low Manhattan office pricing average of $499,” Cushman noted.

Notably, three of the top four office sales in the second quarter were either distressed deals or user purchases.

TRANSACTION SIZE

Overall, the average transaction size in New York City rose to $10.8 million, a five-quarter high, driven by large private capital, institutional buyers, and owner-users employing cash or low-leverage to snag value opportunities.

Cushman & Wakefield forecast a “substantial swell of investment activity in the second half of 2024,” triggered by a deployment of dry powder and “at least one interest rate cut anticipated this fall.”