Jan. 2 (Bloomberg) -- Manhattan commercial real estate sales fell 66 percent to $17.09 billion in 2008, the lowest in four years, as the worldwide credit freeze sidelined buyers.

Only 20 property sales worth $5 million or more closed in the fourth quarter and there were 250 such deals in the year, according to Real Capital Analytics Inc., a New York-based real estate data service.

Fourth-quarter Manhattan transactions totaled $961 million, down 90 percent from the same period a year ago. Sales are declining as prices continue an 18-month slide. Job cuts among financial institutions and waning demand for office space have driven potential buyers from the market, said Stephen Pearlman, director of corporate finance in the New York office of Houlihan Lokey Howard & Zukin.

“Buyers are afraid to commit to buy something because they’re afraid the price will go down even more tomorrow,” Pearlman said.

The lack of transactions helped drive the Bloomberg Office Real Estate Investment Trust Index down 42 percent last year, the worst performance for the measure since it started in 1994. SL Green Realty Corp., New York’s biggest office landlord, fell 72 percent. About 75 percent of the company’s 31.6 million square feet are in 30 New York office buildings.

Market Stagnation

“The last time New York City witnessed this type of stagnation in the investment sales market was in the third quarter of 2001, when facing the effects of the technology bust and 9/11,” said Dan Fasulo, managing director at Real Capital.

Sales are likely to continue to be stalled through at least the first quarter, Pearlman said. The Federal Reserve and U.S. Treasury’s move to give banks financial assistance need to take hold and embolden lenders to make loans again, he said.

Only “until we reach some kind of bottom are we going to see people make decisions to sell or buy property,” he said. “People are going to have to have a confidence that prices are not going to continue to go down.”

Even as deals declined, the city set a record price for a U.S. commercial building in 2008 when Boston Properties Inc., the largest U.S. office REIT, paid $2.8 billion for the General Motors Building on Fifth Avenue across from Central Park.

New York developer Harry Macklowe was forced to sell the 50-story tower after he couldn’t refinance seven other Midtown skyscrapers he bought in 2007 at the peak of the real estate boom.

Fourth-Quarter High

The most expensive commercial transaction in the fourth quarter for both Manhattan and the U.S. was the sale of 1372 Broadway, a 20-story pre-World War I office building in the Garment District, north of Macy’s Inc.’s flagship store at 34th Street and Broadway.

Charlotte, North Carolina-based Wachovia Corp. sold the property for $274 million to New York investor Lloyd Goldman and partners in October, the same month Wells Fargo & Co. agreed to buy Wachovia for $15.1 billion.

The price was $61 million less than Wachovia and partner SL Green Realty Corp. paid for the building in 2007.

Goldman’s purchase was one of only 13 real estate transactions in the entire country in the fourth quarter to exceed $100 million, according to Real Capital. The last time there were so few deals of that size was in the third quarter of 2001, after the Sept. 11 terrorist attacks.

The data from Real Capital Analytics excludes hotel sales.

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net.

Last Updated: January 2, 2009 16:29 EST