In Los Angeles, meanwhile, deal volume fell 11 percent from $14.6 billion a year ago, but it was enough to take over the top spot as the country’s largest market ahead of Manhattan, Dallas, Boston and Atlanta.
“Buyers just aren’t willing to make as many big bets,” Costello said, blaming a range of factors including uncertainty over federal tax policy. “Why make a big bet if you don’t know what will happen to your interest deductibility,” he said, adding that he expects deal volume to remain low for the rest of the year.
Other observers are more optimistic, arguing there’s still plenty of demand for Manhattan properties amid decent leasing activity and employment growth. “For stuff that’s priced well, it moves,” Kraut said.
Hodges Ward Elliott’s Daniel Parker, who along with Will Silverman and Paul Gillen recently brokered the $126 million sale of a Midtown South office building at 31 West 27th Street to Savanna, said he expects deal volume to grow again in the second half of the year because sellers have already become more realistic in their pricing.
“Twelve to 18 months ago, there was a bigger disconnect between buyers and sellers. Now we are seeing more sellers who acknowledge the state of the market,” Parker said. “There is no argument that 2017 sales volume is down overall in the market, but investors can’t sit on the sidelines forever.”