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Investment Sales Hold Firm In Q1 As Industry Braces For Painful Few Months

The New York City investment sales market has been trending downward for some time now, but the impact of the current health crisis could push sales volume to a low not seen in over a decade.

Sales volume in Manhattan hit $4.4B in the first quarter, largely because of big-ticket office deals.

Drastic measures to try and contain the coronavirus in New York were introduced in March, meaning the impact on the first quarter’s investment sales weren't significant. Some $4.4B of sales were recorded in the first three months of the year in Manhattan across 65 transactions, according to Avison Young figures.

That accounts for a 1% drop in terms of dollar volume and a 10% decline in sales numbers when compared to the trailing four-quarter average. But the real pain is likely to come in the months ahead.

“We are starting to look at the number of closings week by week, they are certainly starting to slow down,” Avison Young Tri-State Investment Sales Head James Nelson said. “What is happening now we won’t see it until the second quarter. That is when we expect there will be a significant drop.”

The first quarter of 2020 was mainly driven by the office sector and was carried by big-ticket sales. In March, Amazon closed on its $1.15B purchase of the former Lord & Taylor building on Fifth Avenue and Munich RE picked up 330 Madison Ave. for $900M.

Other major trades from the quarter included the sale of 10 East 29th St., a multifamily building that sold for $381M, and 417 Park Ave., a development property that traded for $184M.

“It was really office deals that carried the first quarter, there were 13 sales for $3.3B,” Nelson said.

He expects the investment sales market to mirror 2009, when there were only a few discretionary sellers.

The multifamily sector, which has been affected by last year’s new rent regulations, recorded $811M in sales, with less than 8% of the trades involving rent-regulated buildings. The price-per-SF slid 27% from the four-quarter average to hit $752.

Retail sales in the borough dropped a whopping 70% from the trailing average, with a total sales volume of $53M. Development sales volume hit $499M, a 77% increase on the trailing four-quarter average with 12 sales, but the average price per buildable SF dropped 22% to hit $514.

“The first quarter of 2020 … [looked like] it wasn’t going to be a terrible year or gangbusters — it was going to be like 2019,” Avison Young principal Erik Edeen said. “[But] looking at COVID, this is going to be the worst year that we’ve seen since 2009.”

New York City has become the global epicenter of the coronavirus pandemic, with more than 7,000 people dead as of Friday across the state. With the city largely closed down, brokers are now trying to run their businesses from home and grappling to make sense of the economic damage that is being caused. 

“There are still buyers that are looking at opportunities now. There are banks lending, but at more conservative levels,” Nelson said. “We are watching this week by week. The question is, how long are we in this place?”