Here comes the re-boom.
A new report from CBRE predicts prices for prime Manhattan properties could break peak 2007 pricing levels.
On average, valuations for prime office properties in Manhattan are approaching levels established at the 2007 market peak and valuations for similar quality multi-housing assets have already surpassed peak pricing, according to an Office & Multi-Housing Capital Markets report released by CBRE Global Research and Consulting.
The report found that strong investor demand for prime Manhattan office and multi-housing assets is expected to result in select prime properties trading at valuations surpassing their peak pricing in 2007.
“We are seeing pricing in Manhattan approach pre-recession peaks for the best assets in New York City,” said Bill Shanahan, vice chairman, CBRE Investment Sales Institutional Group. “Capitalization rates are near 2007-levels, but with current low-financing the returns are actually better now.”
The report notes that, capitalization rates remain constant at lows approaching the levels of the market peak from 2005 to 2007. Prime yields are forecasted to remain low.
Debt capital is more widely available than at any point since the market peak from 2005 to 2007. The report states that underwriting standards are more conservative than at the market peak, but more lenders are in the market and are more aggressively pursuing assets than at any point since the 2008 financial crisis.
A greater number of Class B assets sold in 2012 compared to previous years as investors felt comfortable chasing higher yields.
Fewer trophy assets sold in 2012 than in 2011. Fewer trophy asset sales occurred only in 2009 and 2010, the years immediately following the 2008 global financial collapse.
The limited number of trophy sales is not due to a lack of investor interest. The limited number of properties for sale has made owners hesitant to sell trophy holdings as there may not be a suitable reinvestment option. As a result, there have been an unprecedented number of partial interest transfers, refinancings and recapitalizations, which allow owners to monetize an asset while retaining the option to sell at a later date.
Manhattan multi-housing rents have passed their pre-recession highs. Even when inflation is taken into account, multi-housing rents are at the highest levels recorded since CBRE Econometric Advisors began its index in 2000.