NYC Investment Activity Drops to 10-Year Low

Investment sales volumes have dropped to a 10-year low in Manhattan. A new report from Avison Young shows that investment sales activity totaled $1.1 billion across 21 transactions in the third quarter, the lowest in a decade in the market and a 74% decrease from the third quarter in 2019.

Multifamily transactions led the investment activity with nine total transactions, by far the most transactions of any other asset class. These deals totaled $121 million. Despite serving as the market leader, multifamily sales activity was down 55% and dollar volume was down 82% year-over-year. Cap rates increased slightly to 5.01% and the price per square foot fell to $553, a 40% decline. This shows that there has been a pricing adjustment for multifamily assets in the market—for those still transacting. SL Green’s sale of 400 East 58th Street to A&E Real Estate Holdings was the top multifamily deal. The property traded for $62 million, equating to $443 per square foot and a 5% cap rate.

Development properties accounted for six of the transactions from the quarter, totaling $141 million. Interestingly, the sales transactions were actually a 50% increase year-over-year, but pricing was down 56% compared to the third quarter 2019. Real Estate Equities Corp. purchased a 99-year ground lease of an assemblage at 156-166 Bowery for $50 million, the leading transaction in the sector. The site totals of 90,000 base square feet, which is $556 per buildable square foot.

Only a single property in both the office and retail categories traded hands during the quarter. In office, Savanna Partners purchased a 513,401-square-foot office building at 1375 Broadway for $435 million, or $847 per square foot, which equates to a 4.8% cap rate. Despite the large sale, dollar volumes in office declined 79% for the quarter and the price per square foot fell 36%. Transaction volume fell 89%.

In retail, the single transaction was 152 Franklin Street, a retail condo location that was purchased out of foreclosure for $1.5 million or $417 per square foot. As a result, transaction volume was down 83% and dollar volume was down 99% compared to last year. Price per square foot fell 71%. Office condos and conversion projects accounted for the remaining 4 deals to trade during the quarter.

With transaction volumes down in every category and pricing down in near every category, Avison Young forecasts that transactions in Manhattan will total 155 deals and $8.4 billion by the end of 2020. This would equate to a 74% decline in transaction volume and a 69% decrease in pricing from 10-year averages and 46% and 52% lower than 2019 volumes.