The Real Deal New York

Manhattan I-sales haven’t been this bad since the year Lehman collapsed

Deal volume falls 45% year-over-year to $4.36B in Q3: CushWake
By Rich Bockmann | October 20, 2017 04:35PM

From left: 1568 Broadway, 90 Sands Street and 375 Hudson Street (Credit: ArX Solutions and Google Maps)

Manhattan investment-sales volumes continued to fall during the third quarter of the year, setting 2017’s total on course to be lower than it was in 2008 when Lehman Brothers collapsed.

Commercial property sales across the borough clocked in at $4.36 billion over the past three months, a 45.4 percent decline from the same time last year, according to third-quarter figures from Cushman & Wakefield. That brings the total for the first three quarters of 2017 to $14.37 billion, or 54.6 percent below the $31.66 billion recorded during the first nine months of 2016.

That puts Manhattan on track in 2017 to finish below the $19.8 billion the investment sales market saw in 2008. That’s not to say conditions are similar now to what they were back then, but 2017 does face its own set of challenges.

When Lehman Brothers collapsed, the capital markets dried up and trades ground to a halt. This time around, sales have slowed to a trickle after the market hit a peak of $59.9 billion in sales in 2015 and started to decline as buyers turned their noses up at paying record prices. At the same time, the robust debt markets make it easier for owners who can’t reach their price in the sales market to refinance properties and hold.

One other major difference: Amid the Great Recession, asset prices for all property types fell. Through the first half of the year, the average price for commercial properties traded across the city rose 3 percent on the year to $570 per square foot.

But the increase wasn’t across the board. Property types like land and hotels that are more sensitive to shifts in the market saw pricing decline, while multifamily, mixed-use and office buildings saw pricing increase.

The largest deal of the quarter came in August, when Trinity Real Estate paid $580 million to buy the leasehold at the 1.1 million-square-foot office building anchored by advertising agency Saatchi & Saatchi at 375 Hudson Street in Hudson Square from Tishman Speyer, according to Real Capital Analytics.

Maefield Development, Fortress Investment Group and L&L Holding paid $200 million in July to buy the Doubletree Suites hotel condo at 1568 Broadway from the Nederlander Organization. And in September, Aby Rosen’s RFR Realty bought the residential hotel at 90 Sands Street in Brooklyn from the Jehovah’s Witnesses for $135 million.

Kushner Companies had previously been a partner on the deal when it went into contract, but exited before closing.