Normally, the content in StreetWise is very macro in nature as Itry to make the topics of interest and germane to a nationalaudience. This week, I will divert from this practice to share withyou what we are seeing in the New York City building sales marketand, perhaps, those of you operating in other markets across thecountry can chime in with what you are seeing in your markets. Inthe first quarter of 2010 (1Q10), we did not see the increase insales activity that we had anticipated based upon the positivepsychology many participants in the market are exhibiting. In termsof dollar volume of sales citywide, there were $2.03 billion ofclosed transactions, a 0.7% reduction from the $2.05 billiontransacted in 1Q09. Interestingly, we saw better results inManhattan than in the outer boroughs where activity levels continueto drop from the remarkably low 2009 levels. On the island ofManhattan, we segment the market into two distinct regions:"Manhattan" which is the market south of 96th Street onthe Eastside and south of 110th Street on the Westsideand "Northern Manhattan", which is north of those boundaries. In1Q10, Manhattan sales activity remained relatively unchanged from1Q09 as we had $1.539 billion in closed transactions versus $1.536a year earlier. While this total represented an increase of just0.2% from 1Q09, the 1Q10 activity was up 51% from the $1.01 billionin 4Q09. Northern Manhattan performed much better as sales activityhit $116.9 billion, up 197 percent from the $39.3 billion in 1Q10.It is not surprising to see Northern Manhattan performing as wellas it was the submarket most adversely affected during thisdownturn. Surprisingly, sales activity in the boroughs continued todrop. In the Bronx, sales volume was down 13% from the $79.7million in 1Q09. In Queens, volume dropped to $143.4 million in1Q10, a 20.9% drop from a year earlier. Brooklyn was the weakestperformer with $161.9 million in sales, a 23% drop from 1Q09. 1Q10performance versus 1Q09 performance was relative unchanged on thewhole; however, 1Q09 was not the low point in activity last year.In fact, activity levels dropped from 1Q09 showing that the lowpoint in activity was in 2Q09 or 3Q09 depending on market segment.Therefore, if we annualize 1Q10 activity, the yearly total for 2010would exceed 2009 by about 30%, something that bodes well for thisyear. Manhattan is always the last submarket to fall and the firstto rebound so the 1Q10 activity is a clear indication that themarket is bottoming out and recovery is on the way. While thedollar volume of sales tells us something about market activity, atMassey Knakal we focus much more on the number of buildings sold asa few large transactions can skew the dollar volume totalsignificantly. In fact, in 1Q10 to top 6 sales represented nearlyhalf (48%) of the total dollar volume of sales. In New York City,we track a statistical sample of approximately 165,000 properties.In 1Q10, there were 373 properties sold. This represents a 2.8%increase over the 363 sales in 1Q09. If we annualize the 373 sales,we are on pace to see 1,492 buildings sold in New York City in2010. This represents a turnover rate of 0.9 percent of the totalstock of properties and is up slightly from the 0.87 percentturnover in 2009. To provide some perspective on this projection,in 2006 and 2007, we saw turnover ratios of 2.96 and 3.04respectively. With regard to the number of properties sold, onceagain, Manhattan and Northern Manhattan showed positive gains in1Q10 while the boroughs continued to drop. 1Q10 sales activity wasnothing to write home about, however, there are clearly reasons tobe optimistic. We have seen a significant increase in the supply ofdistressed assets coming to market as banks and special servicersare either close to completing foreclosures or are growing tired ofthe protracted foreclosure process here and are deciding to sellpaper as opposed to waiting to obtain title. The discountsnecessary to sell notes is not large enough to dissuade sellersfrom moving this paper. We are also seeing a substantial increasein supply from discretionary sellers as they see more opportunitiescoming to market and want to either reposition their portfolios orhave some extra dry powder to take advantage of new opportunitiesas they present themselves. Even more positive is the fact thatthese new offerings are being met with tremendous demand. Theactivity on almost all of our exclusive listings (502 as of today)is very strong as we are seeing buyers move off the sidelines andonto the playing field. Based upon the number of contracts we havesigned in 1Q10 (an increase of 87% over 1Q09), we expect activityto pick up significantly in the balance of 2010. We are projectinga citywide volume of sales turnover to exceed 1.2% this year, abouta 40% increase over last year. In Manhattan, we expect turnover toclimb to 1.6% to 1.7%, a 40% to 45% increase over last year. Whilethese projections would still result in historical lows (notcounting 2009 levels), this level of activity would be a welcomedincrease for those of us who rely on transaction volume for ourlivelihood. Just as Manhattan is leading New York City out of thiscycle, we expect New York and Washington (which has already seenpositive shifts in fundamentals) to lead the U.S. out of thisdownturn. We remain firm in our conviction that the worst of thiscycle is over and, while there are still some landmines out there,better times lie ahead of us. Mr. Knakal is the Chairman andFounding Partner of Massey Knakal Realty Services in New York Cityand has brokered the sale of over 1,050 properties in his careerhaving an aggregate market value in excess of $6.2billion.

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