Manhattan office sales more than double

The volume of Manhattan office property sales has more than doubled in the second quarter to $5.5 billion, after lagging the rest of the commercial property sales market in the first quarter of 2011 and all of 2010, according to Eastern Consolidated’s office property mid-year report for 2011 released today.

After stalling for more than nine quarters, the office sales market surged in the second quarter with 14 sales of $100 million or more, the report shows. Those included Paramount Group’s purchase of a minority interest in 1633 Broadway for $980 million and Monday Properties’ $760 million recapitalization of 230 Park Avenue through Invesco.

These preliminary second-quarter results mark a large increase over the fourth quarter of 2010, when Google purchased 111 Eighth Avenue for $1.77 billion. That deal marked 46 percent of the $3.85 billion volume that quarter.

Even though some of the office market fundamentals have not been overwhelming, New York City’s economy has grown at a faster rate than the national economy over the last two years in nearly every sector outside of manufacturing, the report notes. At the same time, with so many office conversions over the last two decades that have canceled out all of the new office construction, New York’s constrained supply of office space has kept a lid on office availability and prevented office rents from plummeting.

“At some point we knew office sales had to trend upwards,” Peter Hauspurg, CEO of Eastern Consolidated, said in a statement. “Investor demand for Manhattan office assets has far outstripped supply for several years, and as a result, cap rates have dropped to historic lows for this class, that is 4 percent to 6 percent, which has finally drawn sellers into the market.”

Earlier this week, Eastern Consolidated had reported that historically low cap rates have drawn Manhattan commercial property owners to the table and ignited the previously anemic market. — Miranda Neubauer