The Real Deal New York

Investment sales brokers sound off on 2012

Some anticipate activity will pick up in the second half of the year
December 30, 2011 02:19PM

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Helen Hwang, an executive vice president at Cushman & Wakefield, Aaron Jungreis, president at Rosewood Realty Group, James Nelson, a partner at Massey Knakal Realty Services, David Schechtman, senior director at Eastern Consolidated

Compiled by Adam Pincus

Brokers broadly expect next year to be an improvement over 2011 in New York City’s investment sales market, although concerns about the global economy and financial services layoffs create uncertainty, and that puts a drag on activity. This year, total investment sales are expected to end up at about $25 billion, far ahead of the $14.5 billion in 2010. The Real Deal talked to a series of brokers about what they expect for the new year.

Helen Hwang
, an executive vice president at Cushman & Wakefield

How do you describe the mood of buyers and sellers? 

Buyers remain cautious, yet most of them, both domestic and foreign, are sitting on large pools of capital and are frustrated by the lack of deal flow. Sellers may be hesitant to sell, seeing that pricing may have slipped slightly for value-add transactions, as investors pull back rent growth and absorption assumptions. At the same time, they recognize serious pricing can be achieved for the right products.

Will distress and partial sales lead the way?
Distressed sales volume in Manhattan has drastically declined in 2011 from 30 percent in the first half of the year to roughly 15 percent in the [third quarter] and 10 percent in [the fourth quarter].

James Nelson
, a partner at Massey Knakal Realty Services

What type of property will stand out in 2012? 

As far as asset classes, downtown development sites will continue to trade at record levels, as luxury condo product is in high demand. We’ll actually face a shortage. In prime neighborhoods such as the West Village, Soho, Tribeca and Nolita, expect prime land to trade above $650 [per square foot buildable].

Will distress and partial sales lead the way, as it did for much of the past two years?
As far as distress, 2011 pretty much wiped out all [New York City] loan sales and REOs [bank-owned properties] which were in the market. Most broken projects have been recapped and repositioned.

Aaron Jungreis
, president of Rosewood Realty Group

What will be the biggest surprises in terms of product type, in 2012?

I don’t think there will be major surprises. I think multi-family will continue to be strong and office will be average. I don’t see jobs opening, you don’t see unemployment sinking, and if there are no new jobs, why take space. But I do think [sales of] new development [projects] will continue to grow.

David Schechtman
, senior director at Eastern Consolidated

What area of the city do you believe will stand out in 2012?

In Manhattan, I think you will see surprising high-water marks for the Financial District, for all kinds of product. People realize on a price-per-pound basis you can still buy product below replacement cost in the Financial District. You can’t do that in Midtown anymore.

Christen Portelli
, managing principal at Highcap Group

How do you describe the mood of buyers and sellers?

Buyers are hungry for deals and aggressively looking, however the product is slim. Some sellers are unsure if the prices will remain stable or continue to rise and that plays into the timing of a sale.

What do you expect for the office market next year?

The growth in the technology sector will help drive the office leasing market as these firms seek out space.

Andrew Scandalios
, senior managing director at Holliday Fenoglio Fowler

Generally, what do you expect for 2012?

The second half of 2011 was not as strong as the first half from a pricing and transaction volume perspective. I expect 2012 to be the exact opposite with transaction volume and pricing to get stronger as the year progresses. Core deals for office, retail and [multi-family] will continue to be the most sought after along with true distressed deals.

Robert Knakal
, chairman of Massey Knakal Realty Services

Generally, what do you expect for 2012?

[It] will be a boom year for investment sales — much better than 2011 — as both dollar volume and number of buildings sold return to the long-term trend line and an anticipated capital gains tax increase in 2013 will precipitate larger than normal supply.

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