Big-Ticket Building Sales In Manhattan Are Still Slumping

The city’s lackluster investment sales market — in which Manhattan dollar volume dropped by 45% between 2016 and 2017 — has been largely driven by a dip in big-ticket sales.

Last year, Manhattan’s transaction dollar volume hit $21.6B, according to figures released by Cushman & Wakefield Wednesday morning. That is down from $39.6B in 2016, and a 66% decrease from the $63.2B total in the market peak in 2015. Last year, the number of properties sold in the borough fell 21% year over year to hit 309.

The overall dollar volume decrease was driven by a scarcity of sales at the top end of the market. There were just 25 transactions over $250M in Manhattan last year, according to C&W, down from a total of 32 in 2016 and 49 in 2015.

“We have a very large pipeline with some very large deals in the works now,” said C&W co-Chairman of Capital Markets Doug Harmon, noting some high-end deals at the tail end of the year pushed up the annual dollar volume from a “dire” state.

Germany-based Allianz Real Estate's purchase of a 43% stake in 1515 Broadway from SL Green in November, for example, valuing the building at $1.95B, and Blackstone's contract for a 49% stake in Brookfield Property Partners One Liberty Plaza in December pegged the building at $1.55B.

Despite the late bump, billion-dollar transactions still decreased by 45% between 2017 and 2016. But Harmon noted partial interest transactions in the billion-dollar market continued to grow.

“The partial interest market has been growing since the start of the credit crisis,” he said, noting foreign investors are often attracted to that sector. “In 2016, there were more partial interest sales of the big-deal market than there were full sales. And in 2017, it was dominated by partial sales.”

The outer boroughs fared better last year, C&W figures indicate, with dollar volume going down by 27%.

While Manhattan’s average price per SF — not including retail — went down by 5% to $1,073, the outer boroughs average increased by 9% to reach $387.

C&W’s Chairman of New York Investment Sales Bob Knakal said that investment sales in the city are now in the 28th month of a correction, and that market forces hitting Manhattan will soon leak into to the outer boroughs.

“What happens in New York happens in Manhattan first,” he said.

In the past, downward cycles have lasted four or five years, according to Knakal, who said the impact from the Savings and Loans Crisis in the early 1990s, the burst of the dot-com bubble in the early 2000s and the Great Recession all lasted about half a decade. 

“We are three years into a downward volume market in regard to buildings sold, only two years in dollar volume, so history would tell us that we should have another year or two in this downward volume market,” he said.

However, he pointed that previous downturns were all caused by a catalyst event.

“There hasn’t been anything to precipitate this downturn, so history could repeat itself a little differently this time,” he said.