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International Investors Backed Away From Manhattan CRE Last Year

View of Lower Manhattan and the World Trade Center, New York
View of Lower Manhattan and the World Trade Center, New York City

The significant drop in Manhattan investment sales in 2017 was influenced by foreign investors leaving the market, according to Eastern Consolidated’s 2017 year-end report.

The total dollar volume of sales was $23B last year, a 41% year-over-year decline, the report found. It was the lowest total volume in seven years since the $14B low point of 2010.

While international buyers still accounted for a third of Manhattan sales last year, that figure was a drop from a total of 42% of the market in 2016.

Despite the fact Singapore has now overtaken China as the largest Asian buyer of United States real estate, Chinese investors led the pack of international buyers in Manhattan, racking up $2.5B in commercial real estate in the borough throughout 2017, a 62% drop from the year before. The vast majority of that volume came from HNA Group's $2.2B purchase of 245 Park Ave., which it is now trying to sell less than a year later.

Canadian buyers bought a total of $1B, a 19% decline, and investors from Hong Kong paid for $547B worth of commercial buildings, a 55% drop from the year before. Germany-based buyers’ investment totaled $839B, down by 64%, while investment from the United Kingdom plunged 87% to hit a total of $188M. Israeli buyers accounted for a total of $180M, a 74% fall from 2016.

Across the board, Midtown West saw the greatest level of investment in the borough, with the neighborhood hitting a total of $5.1B, thanks to SL Green and RXR Realty's purchase of a majority stake in One Worldwide Plaza and German insurance company Allianz SE buying a stake in 1515 Broadway for $460M.

The neighborhood of Chelsea saw an increase in investment, with dollar volume hitting $2.1B, an 8% increase from 2016. The West Village also experienced a jump, seeing a 146% increase in dollar volume hit $1.2B.

“The slowdown is a reflection of a turning market, and when a market turns, there tends to be a lull in sales activity as buyers and sellers adjust their expectations,” Eastern Consolidated Chairman and CEO Peter Hauspurg said.

New York City experienced a lackluster year in 2017 overall, separate reports have found. Investment sales dollar volume in  Brooklyn hit approximately $6.3B in 2017, a roughly 19% decrease from the year before, according to TerraCRG’s 2017 Brooklyn market report. A report from Cushman & Wakefield found there were just 25 transactions over $250M in Manhattan last year, down from a total of 32 in 2016 and 49 in 2015.