NYC's Office Condo Market Hits Five-Year Low Point

New York City's office condo market hit a half-decade low in the first half of the year as certain users bought up their space amid the dip in prices.

Condo sales and values were significantly below the market’s five-year average between January and July of this year, likely the lowest point it will get, according to a Rudder Property Group report. The 15 deals that closed over that time frame — down from an average of 23 over the past five years — reflect the market before the vaccine was widely available in the city, Rudder Property Group principal Michael Rudder said in a statement.

“Many of these transactions were negotiated in late 2020 and early 2021,” he said. “Over the past several months, we’ve seen pricing increase steadily, which I expect will continue into the new year.” 

Price per SF dropped to $608 per SF, 26% lower than the five-year average, per the report. But while the decrease in sale value is a blow to the industry, the Covid discount was a boon for a certain group of buyers. 

The medicine, nonprofit and jewelry industries — all sectors that were more resilient against the economic crisis brought on by the coronavirus pandemic — made up a bulk of the purchases during the first half of the year. 

Notable buyers include the nonprofit Committee to Protect Journalists, which paid Imperial Cos. $10M for 12K SF at 515 West 38th St., and jeweler Shefi Diamonds, which dropped $4.2M on a 5K SF condo, which bought space it plans to occupy.

Out-of-state investors also seized on the opportunity. A Miami-based buyer purchased an $8.3M four-unit medical office condo package at the bottom of the residential building, 345 East 37th St., in one such sale. 

“This sale is the boost that medical mile needed to remind medical investors that this is a ‘once in a cycle’ opportunity to own one of the most insulated asset classes in New York City,” Compass Vice Chair Adelaide Polsinelli, who brokered the sale, said in a statement at the time. “While the real estate industry was hard hit by the pandemic, this sale highlights the unique advantage presented by buying a bulk package of medical office condos that was fully occupied throughout the pandemic.”

CORRECTION, AUG. 20 AT 1 P.M. ET: A Miami buyer purchased four office condos at 345 East 37th St. for $8.3M. A previous version of this story misstated how many condos were part of the deal. This story has been updated.