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Manhattan investment sales hit lowest in decade

 Manhattan investment sales continued to suffer the consequences of COVID-19 in the third quarter with 21 transactions, the lowest number of sales since the third quarter of 2009, and a 64 percent decline from the third quarter of 2019, according to Avison Young’s 3Q20 Property Sales Report.

Dollar volume totaled $1.1 billion, a 74 percent decrease off the third quarter of 2019 and the lowest level since the first quarter of 2010.

Two transactions, 1375 Broadway (pictured top) and 522 Fifth Avenue, which went into contract before the COVID-19 shutdown, accounted for 68 percent of the total dollar volume in the third quarter.

The annualized pace of transaction velocity forecasts that 2020 will end with 155 sales and $8.4 billion in dollar volume, which is a 72 percent and 69 percent decrease off the ten-year averages, respectively. These totals are 46 percent and 52 percent lower than 2019’s tallies, which marked the previous 10-year low. 

The following is a breakdown of third quarter investment sales by asset class:

400 EAST 58TH STREET

Multi-Family/Mixed-Use
The third quarter of 2020 only recorded nine multifamily/mixed-use transactions for a total of $121 million in dollar volume, a decline of 55 percent and 82 percent, respectively, compared to the third quarter of 2019. Pricing fell to $553 per square foot, which is a 40 percent decrease off the third quarter of 2019 and a new low for the year. Average cap rates rose to 5.01 percent, an increase of 67 basis points from the third quarter of 2019. The leading transaction for the quarter was 400 East 58th Street, which was sold by SL Green to A&E Real Estate Holdings for $62 million, equating to $443 per square foot and a cap rate of 5.00 percent.

Retail 
The third quarter of 2020 only saw one retail transaction for $1.5 million. The sole transaction for the quarter in Manhattan was 152 Franklin Street, a vacant retail condo in Tribeca that sold for $417 per square foot and was bought out of foreclosure.

Office

The third quarter of 2020 saw only one office sale for $435 million, while the office condo market recorded three sales totaling $412 million. The 513,401 s/f office building at 1375 Broadway, which went into contract in February, was purchased by Savanna Partners for $847 psf at a 4.80 percent cap rate. Rents in the building are below market, which will allow for a value-add opportunity.

Development

The third quarter of 2020 saw six development sales for a total of $141 million dollars, a 50 percent increase and a 56 percent decrease, respectively, off the third quarter of 2019. Based off the third quarter of 2019, the price per buildable square foot decreased by 22 percent to $483, while the total number of buildable square feet decreased by 56 percent to 253,617. The leading transaction for the quarter was Real Estate Equities Corp.’s 99-year ground lease purchase of an assemblage at 156-166 Bowery for $50 million. The assemblage has a total of 90,000 BSF, equating to $556 per buildable square foot.

Across the city as a whole, the investment sales market continued to soften. For the second straight quarter, both transaction and aggregate volume fell, according to Colliers.

ANDREW JACOBS

“There’s still a degree of uncertainty in the market concerning both the upcoming election and fears of a second COVID-19 wave. That uncertainty could potentially lead to another soft quarter in terms of transaction volume,” said Andrew Jacobs, Managing Director, Colliers International Capital Markets.

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