International Buyers Lift NYC's CRE Sales Market To Best Quarter Since 2022
The Manhattan investment sales market had its best three-month stretch since 2022 to start the year, but most of that activity is being driven by deep-pocketed foreign buyers that are only eyeing a select few properties.
The rest of the market is still largely frozen, new Avison Young data provided to Bisnow shows.
Across the city, there were $3B in commercial properties sold during the first quarter, $2.2B of which was in Manhattan. While the number of transactions was lower than at any point since Q1 2023, the last time Manhattan CRE sales topped $2B was the final three months of 2022.
Nearly half of the borough's sales total came from one deal — Gucci parent company Kering's $963M purchase of 715-717 Fifth Ave. from Wharton Properties and SL Green.
“This is a perfect encapsulation of the trend of luxury retailer end-users purchasing their own properties in this market,” Avison Young principal and Head of Tri-State Investment Sales James Nelson said in an email.
The third-largest deal in the quarter was the $153M sale of Home Depot-anchored retail condos at 401 E. 60th St. from Israeli company Gazit Horizons to Hennick & Co., the family office of Canadian real estate billionaire Jay Hennick. Chanel and LVMH are reportedly competing for another Fifth Avenue tower.
“Sales activity and demand is largely coming from the private sector, further comprised of foreign, high net worth individuals driving the mid-market, with the high end driven by end-users,” Avison Young Principal Brandon Polakoff said in an email.
Those top-end sales aren't indicative of the broader market, which is still seeing far less activity than the long-term average. The pace of Manhattan sales in Q1, if it continued through the year, would be 62% lower than the 10-year annual average.
“We were optimistic that a potential rate cut or two in the near term would motivate buyers and sellers to get off the sidelines, but the recent inflation news continues to impact and prolong investors’ returning en masse to the market,” Nelson said.
Office properties continued to languish in uncertainty as lenders and would-be buyers watched tenants gravitate toward the best-in-class product and abandon Class-B and C product.
While trophy assets aren't selling, more properties at the bottom of the market are trading hands, showing how far values have fallen. The number of office trades doubled, Nelson said, while the dollar volume fell year-over-year from $394M to $188M.
The shadow of political uncertainty over housing interfered with sales of both development sites and existing multifamily properties, Nelson said.
Multifamily was responsible for just 25% of the total dollar volume for the quarter. However, the asset class accounted for the largest number of sales, with 21 of the 51 transactions taking place classified as multifamily.
The overall second-largest sale of the quarter was A&R Kalimian Realty’s luxury residential building The Aire, which the family firm sold in February after defaulting on its senior loan late last year. A joint venture between The Carlyle Group and Gotham Organization shelled out $265M for the 42-story building, which has 310 residential units and two retail units.
The second-biggest multifamily sale during the quarter was Kushner Cos.’ $41M sale of its East Village portfolio. Penn South Capital acquired the 79-unit mixed-use portfolio in February, marking Kushner Cos.’ third residential sale in the neighborhood within three months, The Real Deal previously reported.
But the third was a sale with potential signals of trouble for parts of NYC’s rental market hovering in the background: BGO’s sale of the 82-unit, rent-stabilized 120-125 Riverside Drive to Aya Acquisitions. The private equity real estate specialist swallowed a 64% haircut when it sold the buildings for $31M, TRD reported.
The lack of big multifamily sales is also something that affected development sites, where sales volume was down 10% from last quarter, per Avison Young’s data. However, the dollar volume for development sales was $205M, making it nearly a threefold year-over-year increase from the $86M a year prior as an increasing number of condo developers started making moves.
Still, developers and investors alike are waiting to see what sort of housing deal gets passed in with the state budget in the coming days, Nelson said.
“The institutions are still watching to see what happens in Albany regarding good cause eviction and 421-a before making big decisions,” he said.
