NYC investment sales hit multi-year peak to end 2021

Billion-dollar deals for office, industrial and multifamily assets boosted the market to levels not seen since 2018

(iStock/Illustration by Kevin Rebong for The Real Deal)
(iStock/Illustration by Kevin Rebong for The Real Deal)

Mirroring a late-year surge observed in Manhattan, New York City’s investment sales market ended the year with a flurry of activity as deal volume topped levels last seen in 2018 and dollar volume achieved at least a four-year high.

The city recorded 626 investment sales in the fourth quarter, according to a report by Ariel Property Advisors, the most in a single quarter since the beginning of 2018, when 643 deals closed. Sales in the last three months of 2021 combined for $13.8 billion, a 143 percent jump over the same period a year prior, accounting for just under half of the nearly $28 billion in deals recorded in all of 2021.

Driving those gains: bigger deals.

“The story of the fourth quarter has been the big sale,” said Shimon Shkury, founder and president of Ariel Property Advisors. The city saw seven transactions above $100 million and 14 above $50 million, while several portfolios traded for more than $1 billion, the executive said.

The top-grossing transaction for the period was Edison Properties’ sale of Manhattan Mini Storage to Storage-Mart in December for over $2.9 billion, Shkury said. That deal included 18 self-storage facilities spanning a combined 3.1 million square feet.

Hudson Commons, an office building home to Peloton and Lyft, sold in December for about $1 billion — the priciest deal for an individual investment property in the city since 2019.

Rockpoint Group and Brooksville Partners bought out Belveron Partners’ stake in Starrett City, a mammoth affordable housing complex in East New York, in a deal that valued the property at $1.8 billion.

Shkury called the performance of multifamily assets throughout the pandemic “prolific.” The fourth quarter saw a greater concentration of pricier trades. The last three months of 2021 saw 14 deals worth at least $50 million deals, compared to 12 throughout the first three quarters of the year combined, Shkury said.

Affordable housing was a particularly hot commodity.

“About a third of all multifamily transactions have been affordable housing with a capital a,” Shkury said.

Considering the strength of investment sales as a whole, Shkury pinned the heavy volume on an influx of investors looking to exit the market. He said owners across sectors who may have put sales on hold during the pandemic are now looking to unload.

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“There’s this feeling that, ‘Okay, the market is back,’” said Shkury. “If I wanted to sell in the past 24 months, I couldn’t exit at the right number. I feel that now the market is prepared for me.”

Developers and new buyers, eyeing prices that are still below average, will also be looking to get in on the action, driving transaction momentum into 2022. Shkury noted that development sites below 96th Street are still trading for less than $500 per square foot.

By contrast, around 2015 when land prices were at their peak, buyers consistently bid an average of $685 per square foot.

Preliminary tax assessment data released by the city this week show the market value of city properties is also staging a recovery. Rental, co-op and condo buildings are expected to jump 8.7 percent in value this year; commercial properties, including offices and hotels, should rise by 11.7 percent.

In November, prior to the Omicron surge, Manhattan’s office market finally saw leasing surpass pre-pandemic levels. Sales in the sector also saw a fourth-quarter rebound. Ariel’s report found that the dollar volume jumped 219 percent from $1.1 billion in the fourth quarter of 2020 to $3.6 billion in the fourth quarter of 2021, though the $1 billion deal for Hudson Commons accounted for a large chunk of that.

Shkury said he sees further room for improvement, especially among Class A office space: newer buildings in prime locations. The majority of office properties that traded in the fourth quarter were Class A, he said.

As for warehouses, the new golden child of the investment sales market, Shkury said ample development sites zoned for industrial use, as well as existing assets, should continue to trade hands, leading to “a few years of growth here in the city.”

Measured by dollar volume, industrial sales soared 782 percent year-over-year in the fourth quarter. Shkury cautioned that the sector may not be able to maintain the performance it saw over the past year, but that there will still be “aggressive buyers interested in [industrial].”

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CORRECTION: In the fifth paragraph: Manhattan Mini Storage traded for $2.9 billion in December, not $3 billion in November. In the thirteenth paragraph: Development sites, not buildings, are still trading below $500 per square foot. Article was updated to include peak prices of development sites.