Commercial market report

From an I-sales comeback in Queens to REIT merger mania, a look at the biggest trends

Mar.March 01, 2019 12:00 PM

Queens saw 619 deals totaling $4.67 billion in 2018.

Queens I-sales enjoyed a rebound in 2018

The Queens investment sales market bounced back last year, boosted by a few big deals. The borough saw 619 deals totaling $4.67 billion, according to a report from commercial real estate firm Ariel Property Advisors. Those numbers represented a 39 percent increase in dollar volume but just a 7 percent increase in deal volume, compared with 2017. “Since fewer properties were sold, large institutional-caliber acquisitions were a substantial driver behind these strong figures,” said Ariel director Alexander Taic. In August, the Carlyle Group broke Queens’ record for a rental building transaction, paying $284 million for Long Island City’s 1 QPS, a 45-story luxury tower. A month later, fellow buyout giant the Blackstone Group acquired the Parker Towers rental complex for $475 million. The multifamily sector was the most active last year with 295 sales across 325 buildings for a total of roughly $1.8 billion, according to Ariel. Development sites followed with 197 sales totaling $1.7 billion, a 19 percent increase in dollar volume and a 15 percent increase in deal volume over 2017. Northwestern Queens, which includes Astoria, Long Island City and Sunnyside, was once again the most active submarket, accounting for 60 percent of the borough’s deals in 2018.

Big West Side leases bolstered Manhattan’s office market

Leasing activity in Manhattan totaled 35.3 million square feet in 2018, the highest annualized amount reported since 2014, according to a report by JLL. Big leases on the West Side gave a boost to the city’s office market at the end of last year, as did some anchor-sized occupancies. For example, Google and the Walt Disney Company announced new campuses in Hudson Square, and Peloton signed a 312,000-square-foot lease at the under-renovation 441 Ninth Avenue. These deals “indicate that the local economy will continue to diversify in the coming years — a departure from the market’s long-term reliance on the financial services sector,” the JLL report said. The robust activity also helped lower the total vacancy rate by 50 basis points in the fourth quarter, to 7.3 percent, the lowest fourth-quarter rate since 2007. Heading into 2019, office market fundamentals should stabilize in the city, according to JLL.

REIT consolidation to continue as discounts abound

Deals among real estate investment trusts are expected to maintain — or outpace — last year’s trend toward more mergers and acquisitions. Many REITs also traded at notable discounts, which should continue in 2019, said Greg Ross, head of the construction, real estate, hospitality and restaurants industry group at accounting and consulting firm Grant Thornton. “There are many investors and a great deal of capital waiting for the right time with values [and] cap rates,” he told National Real Estate Investor. “The real estate fundamentals are very strong, with low unemployment, low interest rates and high consumer confidence.” In 2018, Brookfield Asset Management had two of the biggest REIT deals, buying retail-focused GGP for nearly $27.2 billion and Forest City Realty Trust for $11.4 billion. One New York-based REIT trading at a discount is SL Green Realty, according to an analyst note by 2nd Market Capital. SL Green’s properties, however, are well-located and should continue to grow despite near-term challenges, 2nd Market said.

As multifamily deals spike, Rego Park package seeks $210M

With multifamily activity in Queens on the upswing, a massive Rego Park portfolio hit the market in late February asking $210 million. The Kestenbaum family — which has owned 18 adjacent properties along Queens Boulevard for the past 75 years — is testing investor interest in rent-regulated apartments as New York lawmakers weigh reforms. A newly Democrat-controlled State Senate is expected to introduce legislation that would make it harder to deregulate apartments or raise rents on regulated units. “There is concern because we don’t know what the next round of legislation will bring, but we’re committed to selling,” said B6 partner Thomas Donovan, who is managing the sale of the Rego Park portfolio, one of the largest in Queens to come up for sale in recent years. Meanwhile, the city’s multifamily market saw increases across the board in 2018. Overall, the city had $11.1 billion in multifamily sales across 473 deals and 896 buildings last year. Compared to 2017, Ariel Property Advisors found those numbers represented a 55 percent increase in dollar volume and a 5 percent uptick in transaction volume.

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