Manhattan commercial-property sales more than doubled in the first half of the year, led by the highest-quality buildings, as investors competed for assets.
Transactions completed through June 30 totaled $13.1 billion, up from $5.2 billion in the first six months of 2010, Cushman & Wakefield Inc. said today in a statement. Another $4.4 billion of deals are under contract, according to the New York-based brokerage.
Demand for prime properties is rising as Manhattan office leasing improves and buyers seek to put capital to work. Institutional investors and real estate investment trusts led purchases, making almost two-thirds of deals in the first six months of the year, according to Cushman.
“The institutions and pension funds are really back in the market in a big way,” Joseph Harbert, Cushman’s New York-area chief operating officer, said in a briefing for reporters. “The smart REIT money got active in the market in ’10, and is still very active. The foreign money as a percentage now is not as active.”
Properties priced at $100 million or more are “selling at a very brisk pace” and driving the market while lower-end sales are more sluggish, according to Robert Knakal, chairman of commercial-property brokerage Massey Knakal Real Estate Services, which also issued a report today on Manhattan sales.
There were 31 deals priced above $100 million through June, more than in all of 2010, when there were 29 such transactions. Sales in that range are on pace to more than double this year, Knakal said.
The average deal price for the first half of the year was $13.1 million, higher than the $12.3 million reached at the market’s peak in 2007, according to Knakal.
Paramount Group Inc.’s purchase of a 49 percent stake in 1633 Broadway for $980 million was the largest deal in the second quarter, Eastern Consolidated, a New York-based investment brokerage, said in a report today.
“The banks are welcoming the opportunity to lend to the buyers of commercial properties in New York,” said Daun Paris, president of Eastern Consolidated. “You have so few other businesses and consumers seeking loans and the banks need to put out some money.”
Retail-property transactions exceeded 2010’s total, with $979.7 million in assets changing hands through June, the brokerage said. Inditex SA, the Spanish parent of the Zara clothing chain, set a record in March for a U.S. retail property when it bought the former NBA Store at 666 Fifth Ave. for $324 million.
Deals under $100 million totaled 221 through June and are on pace to increase 13 percent for the year from 2010, Knakal said. Transactions below $50 million are on pace to decline 7 percent.
“The high end is recovering, but otherwise the market is kind of slogging along,” Knakal said. “It is taking longer to gain the traction that we like.”
Massey Knakal reported that the dollar volume of all commercial-property deals in Manhattan totaled $11 billion through June, a 124 percent increase from the same period last year.
Property values are rising in the borough “partly as a result of improving leasing fundamentals and partly as a result of a tremendous amount of capital focused on New York City,” Harbert said in Cushman’s statement.
A total of 17.6 million square feet (1.64 million square meters) of new office leases were signed through June, the highest six-month tally in more than a decade, according to Cushman. Leases were up 40 percent from a year earlier.
Manhattan office rents increased 1.4 percent in the last three months and 2.2 percent from a year earlier, to $55.52 a square foot, a pace Harbert described as “modest.”
“You would expect rents to be rising faster than they are” he said, citing the robust leasing and a decline in office vacancies, which fell to 9.4 percent from 10.8 percent at the end of last June.
Potential Wall Street job cuts, lackluster employment growth and concern that the global economy will slow are “keeping a lid on the pot” for leasing, said Dale Schlather, a broker at Cushman.
“There’s plenty of risk out there, and that’s really the issue,” he said.