By Roland Li
New York sales volume rose to $12.6 billion in the first half of 2011, a 103% increase compared to the first half of 2010, according to reports from Massey Knakal Realty Services. Volume increased by 52%, compared to the second half of 2010, and 960 properties were sold, up 15% from the same period in 2010.
“The trend is upwards,” said Robert Knakal, chairman of Massey Knakal. “It’s making acquisition seem very attractive.”
Sales of office properties totaled $5.4 billion, comprising 43% of the market’s dollar volume, and on pace to match 2008 levels. Average price per s/f was $648, but James Nelson, a partner of Massey Knakal, said that positive leasing trends could eventually drive prices to over $1,000 per s/f.
The largest transactions were partial interests, including he Paramount Group’s purchase of a minority interest in 1633 Broadway for $980 million, giving it full control of the building. (Cushman & Wakefield is now marketing a minority stake.) SL Green purchased a 45% partial interest in 1515 Broadway for $544.5 million and Monday Properties recapitalized 230 Park Avenue through Invesco for $760 million.
Manhattan hotel sales increased to $2.4 billion, up 170% from the first half of 2010, with large deals that included the sale of the Radisson Lexington Hotel for $333 million, the Helmsley Hotel’s sale for $313.5 million, and the estate of Lehman Brothers taking control of 2170-2178 Broadway for $191 million. The strength of local tourism has made such properties an appealing acquisition, brokers said.
Retail was mixed, with $635 million in sales representing a 51% dollar increase compared to the previous year, but only 29 properties were sold, a 15% decrease compared to last year. Still, brokers were optimistic, particularly with the continued development around the World Trade Center.
“Things are looking much better,” said Benjamin Fox, executive vice president of retail leasing. “I think the recovery in New York is echoing across the country.”
Development parcels were trading at over $300 per s/f, and brokers said that the price could eventually double, matching the peak. Positive price factors include the scarcity of land, some availability of construction financing, and strong condo sales, particularly downtown of over $3,000 per s/f, which encourage development. With cost of development at around $500 per s/f, luxury projects still have the potential for high profits.
“Dynamics in land are remarkable,” said Knakal, who recently sold 356-366 Tenth Avenue, formerly owned by Extell, for $43.5 million.
Low interest rates were aiding buyers, as well as insulating property owners with distressed properties.
“It’s allowing for positive cash flow for properties with significant equity problems,” said Knakal. “It gives people time to tread water and find a solution or exit strategy that works for them.” Any increase in interest rates would have negative effects on buyers.
Meanwhile, global political turmoil could likely lead to a “flight to quality,” as foreign investors seek to
The outer boroughs also saw gains. The Bronx had 114 sold buildings, up 21% from the same period in 2010, while Brooklyn had 286 sales, an 8% increase compared to the second half of 2010.