The anemic pace of New York City commercial real estate investment sales in the first quarter puts 2023 on a pace to be the slowest year for CRE sales since 2009, in the Great Recession that followed the GFC.
The Q1 2023 total of $2.2B in commercial real estate investment sales involving 108 properties in New York City is a 59% decline across the trailing four-quarter average and a 53% decrease from Q4 2022, according to Avison Young data reported by Bisnow.
The decline in investment sales was seen across all sectors. Only two apartment buildings and one office tower traded for more than $100M.
Manhattan’s multifamily market saw a 77% decline in its trailing four-quarter average for sales volume. The 22 transactions in Q1 totaled $430M; multifamily cap rates have risen to 5.2%, Avison Young said.
The largest multifamily deals in the first quarter were the $115M sale of 408 East 92nd Street and the $100M sale of 550 West 54th Street. None of the other apartment building transactions exceeded $32M.
Hyundai Motor Group’s purchase of 15 Laight Street from Vanbarton Group for $273.5M was the largest office transaction in Manhattan in Q1. Hyundai is planning to include a ground-floor showroom in the eight-story Tribeca redevelopment.
The second largest office deal involved a building sold at a substantial loss: Columbia Property Trust sold 149 Madison Avenue for $77M, $11M less than the company paid for it. The three largest retail transactions in Manhattan in the first quarter garnered $60M, $37M and about $16M, respectively.
Avison Young also reported a 60% drop in the trailing four-quarter average for land sales, with four transactions recorded in Q1, with no land sales for rental.
What Avison Young called “disagreement over sales prices” is further depressing sales activity, along with rising interest rates.
The glacial pace of transactions in Manhattan is a reflection of the uncertainty that is roiling commercial real markets across the US—markets that are bracing for a tidal wave of $1.5T in maturing CMBS loans coming due by 2025 at a time when valuations are tumbling by as much as 40% and banks have slammed shut the refinancing window.
Earlier this month JPMorgan predicted that 21% of CMBS loans associated with office properties are going to default—encompassing about $39B worth of debt—as hybrid work patterns continue,
JPMorgan calculated the loss rate for loan holders at 8.6%, representing about $38B in losses for the banking sector and $16B for life insurance companies. US regional banks hold about 70% of outstanding commercial property debt.