NYC Commercial Real Estate Sales Fell By Over 50% To Start The Year
Sales volumes in New York City commercial real estate slowed across asset classes during the first quarter of this year as economic tensions and uncertainty reverberated throughout the market.
There were $2.2B worth of investment sales across 108 properties in New York City in the first quarter of 2023, representing a 59% decline across the trailing four-quarter average and a 53% decrease from the previous quarter, according to new Avison Young data provided to Bisnow.
The lackluster quarter puts 2023 on pace to be the slowest year in the city's investment sales market since 2009. Although the first quarter of any year is normally quiet compared to other quarters, there is little indication that the pace might pick up during the rest of the year, Avison Young Tri-State Investment Sales Group Head James Nelson said.
“This just pushes us out further,” he said. “I can’t see where all of a sudden we're going to have a sharp increase in sales volumes in the second quarter, especially with the bank failures. There’s just more uncertainty.”
Most of the investment sales in the quarter were on the smaller side. Just three properties — two multifamily buildings and one office — traded for more than $100M in the quarter.
The largest Manhattan office transaction was Hyundai Motor Group's purchase of 15 Laight St., an eight-story redevelopment in Tribeca, from Vanbarton Group for $273.5M. The second-largest was 149 Madison Ave., which Columbia Property Trust sold at a loss for $77M, nearly $11M less than it paid before embarking on a renovation.
Despite being the asset class that investors have been most bullish on in Manhattan for the past year, the borough’s multifamily market saw a 77% decline in its trailing four-quarter average for sales volume. Approximately 22 sales went through totaling $430M, with cap rates rising over half a percentage point to 5.2%.
The two largest multifamily sales, 408 East 92nd St. and 550 West 54th St., fetched $115M and $100M, respectively, but the third-biggest sale, that of the 47-unit 217 Thompson St., was for just $31.5M.
On the retail side, the Dyson family’s $60M purchase of 155 Mercer St. led the pack, and the next biggest retail sales were 2139-59 Broadway, which sold for $37M, and the $16.25M sale of 603 Fifth Ave.
Meanwhile, there was a 60% drop in the trailing four-quarter average for land sales, with a total of four transactions during Q1.
“I would say the land sales that took place were either sold to end users or as assemblages,” Nelson said. “We haven’t seen any land sales for rental. Without 421-a, there’s been a huge slowdown.”
Disagreement over sales prices continues to depress sale volumes, Nelson said, and ongoing economic uncertainty and the Federal Reserve's restrictive interest rate campaign provide little reason for short-term optimism.
While defaults and discounts are on the rise, distress and forced sales will likely only show up during Q3 or even later as owners run out of equity in the face of refinancing deals, Nelson said.
“We are seeing some distress with sales, you do read about that happening,” Nelson said, adding that the contagion is concentrated in the office sector but is also spreading to multifamily because of financing conditions. “It would not surprise me if we start seeing more of those forced sales, but I don’t think there’s going to be a meaningful impact in Q2 because a lot of buyers and sellers are still prolonging decision-making.”
