NEW YORK CITY—It looks like NYC investment sales market could eclipse 2007′s record year on many accounts, if the momentum continues from the first quarter. We are on pace for 5,020 sales this year, which would be more than 2007′s by a hair. Dollar volume could reach $53.1 billion, just shy of 2007′s $62.2 billion.

This all being said, first quarters are usually the sleepiest while fourth quarters are usually the busiest, so the 2007 record sales volume could also be surpassed.

The record setting activity was due in large part to activity in the boroughs, which accounted for 82% of the sales, far greater than 2011′s 68%. This translated to $3.6 billion in sales which was 27% of the total.

There were also pricing records set in virtually every borough, with the exception of the Bronx, which was only slightly off. Manhattan’s average price per square foot for existing buildings surged by 25% to an average of $1,315. This was attributed to the record breaking retail condo purchase by Channel at 733-39 Madison Avenue for $123,800,000 or $30,950/SF, otherwise the Manhattan average would actually decrease slightly to $1,018/SF, a modest 3%.

The borough average price per foot is now up 8% to $258/SF for all property types.  This is still a large discount to Manhattan, signaling great upside potential. The breakout was as follows: Northern Manhattan up 17% to $298/SF; Brooklyn up 13% to $307/SF; Queens up 1% to $287/SF; and Bronx down 1.5% to $156/SF. Cap rates compressed citywide from 7% as a “high” to 5.6% this quarter, signaling strong price appreciation. Manhattan was the “low” at 4.1% while the Bronx offered the highest returns at 7.1%.

Land prices also soared to $209/BSF citywide with Manhattan leading the way with an average of $482/BSF, well above the 5 year average of $363/BSF. In 2009, development site sales accounted for only 5% of all sales, while this past quarter they accounted for 18% of all sales. Office volume also more than doubled from 7% to 20%.

In all, we anticipate that this strength in the market will continue well beyond this year. Although volume is up, it represents a turnover of less than 4%, which is slightly above the historical average of 2.6%.  Meanwhile rents for all asset types are on the rise, while vacancy drops, and condo prices continue to set records daily.

Although there are several new developments on the way, it is important to stress that almost all of these are boutique projects that will not flood the market. Also, office is also only being built as tenants are secured. These are all healthy signs. Meanwhile, interest rates are still at historical lows, but only at low loan-to-values, which should guard against a repeat of 2009′s market collapse. 

We are closely watching macro trends in the economy, as well as the new de Blasio administration, to see how these external factors will impact values moving forward. Time will tell if this activity and pricing is sustainable.