The Real Deal New York

Multi-family demand keeps Manhattan investment sales market stable

April 19, 2012 01:30PM

Investment sales activity was flat in the first quarter as demand for multi-family properties compensated for weakening hotel sales volume, according to a report released today by Cushman & Wakefield’s Capital Markets Group.

Last quarter $5.7 billion worth of sales closed (among deals worth more than $10 million) and an additional $1.5 billion were under contract. The closed transaction volume is exactly equal to last year’s first quarter and just $200 million off the fourth quarter of 2011. While multi-family sales volume skyrocketed 113 percent year-over-year, hotel and office deals fell 44 percent and 13 percent, respectively, over that period. Apartment buildings constituted more than a quarter of all sales.

While real estate investment trusts accounted for 39 percent of total sales thanks to their affinity for big deals, small local investors actually grabbed a larger share of the sales market, a trend The Real Deal has previously noted. Deals worth less than $100 million accounted for one-third of all sales in the first quarter, compared to just one-fifth of them in the prior year quarter.

In terms of debt, yields for high-quality assets in the city remain between 8 percent and 10 percent, according to Cushman, which expects national commercial mortgage-backed security issuance to rise as just $6 billion was released last quarter and year-end estimates called for between $30 billion and $35 billion.

Finally, the report found conditions to be improving in Manhattan’s office leasing environment, where rents increased 7.6 percent in the last year, the rental market, which experienced double-digit rent increases, and the sales market where the average price per square foot rose 6 percent year-over-year. — Adam Fusfeld