The Real Deal New York

Investors doubled down on land buys in Q3

But commercial property transactions overall fell to $7.5 billion during the period
By Katherine Clarke | October 18, 2013 03:26PM

Above all, commercial investors in New York City real estate are after one thing – land.

Sales of prospective development sites multiplied, while sales of other types of commercial properties, including multi-family assets and office buildings, declined in the third quarter, according to data provided to The Real Deal by commercial brokerage Eastern Consolidated.

Indeed, the volume of land and development site sales in Manhattan more than doubled in the third quarter, accounting for 17 percent of all commercial property trades in the borough, while sales of multi-family, office and hotel properties slipped.

Overall, commercial property transactions fell by nearly 17 percent to $7.5 billion from $9 billion in the second quarter. Eastern attributed the slip to a bump in interest rates arising from news early in the quarter that the Federal Reserve would begin to curb its bond-buying program. The government later reneged on its plan to pull back on the program.

Sales of land and development sites accounted for $1.3 billion of the $7.5 billion in commercial deals during the time period, a 103 percent uptick from the $640 million in deals they made up in the same period last year. The largest deal in the quarter was the sale of 101 Murray Street in Tribeca to Fisher Brothers and the Witkoff Group for $200 million, or $600 per buildable square foot. The partnership has plans to bring a 370,000-square-foot residential project to the site.

Meanwhile, the total dollar volume for Manhattan office building trades was $4 billion, a 20 percent drop after trades doubled in the second quarter to $5 billion, according to Eastern’s data. Still, three major office buildings traded in Lower Manhattan, compared to just one last quarter.

Multi-family sales volume also lagged, falling 21 percent from $1.9 billion to $1.5 billion. The largest multi-family sale in the third quarter was the Orbach Group’s purchase of a 33-building Upper Manhattan portfolio for $247 million. Later, Orbach flipped 11 of the properties for $100 million. Outside of those two deals, no multi-family trades topped $100 million in the third quarter.

Despite drop offs in multi-family and office sales, Eastern CEO Peter Hauspurg said demand for those types of assets is as strong as ever.

“The statistics for the third quarter do not accurately reflect the demand we are seeing,” he said. “Recent uncertainty from the government shutdown may subdue volume in the fourth quarter but any impact should be temporary. Prices should still hold firm.”

Only one hotel traded in the third quarter, the Setai at 400 Fifth Avenue, which sold to Hong Kong-based Eagle Holdings Corp., accounting for $229 million in sales. Hauspurg attributed the low hotel sales volume to the strength of the hospitality market, saying that there is a lack of listings because owners want to hold on to their hotel assets.

Besides land, the only other asset class to see a rise in sales in the third quarter was the retail sector, data show. Following two consecutive quarters of minimal activity, retail sales doubled to $375 million, according to Eastern. However, volume was still far below the $2.5 billion in retail sales seen in the fourth quarter of 2012.