Manhattan building sales rise in first half of 2013

But pricey office property trades boost overall market
July 29, 2013 03:00PM

Manhattan saw a year-over-year increase in the number of investment properties sold during the first half of 2013 but, because some trades include multiple buildings, a decline in the overall number of transactions, according to Ariel Property Advisors’ Manhattan 2013 Mid-Year Sales Report.

The report, which tracks multifamily and other types of investment property activity south of East 96th Street and West 110th Street for deals over $1 million, found that there were 274 transactions involving 351 properties totaling $10.56 billion — a 28 percent jump in dollar volume from $8.199 billion, but an 11 percent decline from 310 transactions, involving 384 properties, in the first half of 2012.

“Razor thin vacancy levels are driving up rents and condominium prices are rising sharply as buyer demand meets scarce product,” Randy Modell, vice president of Ariel Property Advisors, said in a statement. “Both trends are fueling a tremendous appetite for development site sales throughout Manhattan and are causing prices per buildable square foot to surpass heights achieved during the last cycle.”

A decline in investment activity for many investment classes was expected in the first half of 2013, according to the report. Transactions fell 35 percent in the first half of 2013 compared to the same period in 2012, while the number of properties sold fell 32 percent and the dollar volume of the trades tumbled 17 percent.

Even so, the office property market is up, with a year-over-year increase dollar volume of 71 percent in the first half of 2013, worth some $5.85 billion, as opposed to $3.43 billion in the first half of 2012. Notable sales include the General Motors Building at 767 Fifth Avenue, in which a 40 percent stake sold for approximately $1.4 billion, and the Sony Building at 550 Madison Avenue, which the Chetrit Group acquired with a three-year leaseback for $1.1 billion in June.

The development site market was also up in the first half of 2013, jumping 105 percent in terms of dollar volume, with $1.4 billion, up from $683 million a year prior. Hotels and rental sites made a small increase in dollar volume, up 15 percent with just over $1 billion in sales, versus $893 million in the first half of 2012.

The multifamily market, however, saw the average capitalization rate drop 4.46 percent as a result of rising rents and low interest rates, according to the report. The average price per square foot is up to $736, the average price per unit is $536,000 and the average gross rent multiple is up to 15.01. Notable examples include 967-971 Columbus Avenue, a 27-unit walk-up building that sold for $10.1 million, or $536 per square foot, and 1546 Second Avenue, a 15-unit walk-up building, which sold for $9.1 million, or $862 per square foot. — Julie Strickland