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'The Worst Market I've Seen': NYC Commercial Real Estate Sales On Pace For Worst Year Since 2009

The dearth of big-ticket deals and major office trades continues to hobble New York’s investment sales market, which is on pace for its worst year since the depths of the Great Recession.


The city is on pace to see fewer than $10B in commercial real estate deals, according to Avison Young figures, a shadow of the historical 10-year average of $34.2B. The last time total investment sales were below $10B in New York City was in 2009, per the brokerage.

Between July and September, just $2.2B worth of commercial properties changed hands, a 41% drop below the average of the four previous quarters and a 21% fall from Q2, according to Avison Young data.

The banking turmoil — chiefly, the collapse of prolific multifamily lender Signature Bank — has dampened investment activity as the fallout has worked its way through the market, Avison Young principal Erik Edeen said.

“Capital is king, and you remove all of these lenders and, guess what, the rest of the lenders in the market are probably seeing those failures and pulling back at that same time,” he said in an interview. “There were probably a lot of deals in negotiation that had to just put the brakes on them.”

In Manhattan, there were 60 trades during the third quarter, a slight uptick from the prior period. Dollar volume, at $1.5B, was 7% down quarter-over-quarter and nearly 40% down on the average of the previous four quarters.

“This is the worst market I've seen in 37 years,” Compass Vice Chair Adelaide Polsinelli said. “The good news is we’ll stay alive for '25, and it’ll be heaven in '27. You can only have so many bottoms.”

In the borough's multifamily market, there was just $675.3M worth of sales, a 45% drop from the trailing four-quarter average. The average cap rate went up 12 basis points to 5.18%.

The biggest multifamily deal was the $210M sale of 377 East 33rd St., a 23-unit residential building New York University bought from Verbena Road Holdings. The second-biggest sale was the California Public Employees' Retirement System and Pacific Urban Investors’ purchase of 130 West 15th St., which Related Cos. sold for $183M.

In the office world, there were just seven sales to close during the quarter totaling $207.9M, a 65% drop on the trailing four-quarter average. Kaufman Investments and Beacon Capital Partners paid the most for an office property during the quarter, picking up 875 Sixth Ave. for $92M from Peter Braus and Jim Wacht. PD Properties, meanwhile, paid $37M for 110 West 32nd St. The seller was the owner of Jack’s 99 Cent Store, the building's longtime retail tenant, according to Avison Young. 

Values have been especially challenged in the office and rent-stabilized multifamily market. Last month, a portfolio of Inwood rent-stabilized apartment units sold at a 44% discount from the price the seller paid in 2016. In a deal that has yet to close, Clarion Partners agreed to sell a Fifth Avenue office building for $100M less than it paid a decade ago, The Real Deal reported.

The per-square-foot price of office sales in the third quarter of $398 was 41% below the trailing four-quarter average, per Avison Young.


Land sales were also quiet, with just three sales to close racking up a total dollar volume of $58.1M — a whopping 75% drop from the trailing four-quarter average. The biggest deal of the quarter was 1691-1695 Second Ave., which sold for $26.2M. Alchemy-ABR Investment Partners was the buyer, and AIR Communities was the seller.

Retail was the only asset class to return somewhat positive numbers — there was $341.4M in sales, tripling the four previous quarters’ average. The 17 sales had an average price per SF of $1,608, a 36% jump. The biggest trade of that asset class was James Dyson’s purchase of 747 Madison Ave., which Jeff Sutton and his partners, the Reuben Brothers, sold for $135M.

The most important reason deal flow has cratered is interest rates remain high, with the Federal Reserve opting at last month's meeting to keep its benchmark rate steady at 5.25% to 5.5%. Fed Chair Jerome Powell indicated that the decision didn't necessarily mean the rate hikes would stop.

And while residential rents in New York have maintained record highs, the office leasing market has continued to slump, with deal volume sliding more than 30% last quarter.

Distress has already shown up in isolated ways across the city, but signs are emerging that it is picking up speed. Multiple owners have fallen behind on their payments or defaulted as their loans have matured, and multiple nonperforming loans have hit the market as lenders try to clean up their books. 

The national delinquency rate on CMBS loans was roughly 4.4% last month, according to Trepp, up from 2.9% a year prior.


While activity was at its lowest point in more than a decade, Avison Young principal James Nelson, the head of the firm's Tri-State investment sales group, said market conditions will necessitate more activity soon. 

“What we're seeing is owners who are compelled to sell because they have loans coming due that they either can't pay down or they don't want to pay down. We are going to see opportunities that we have not seen from a lot of generational families,” Nelson said. “The combination of shifts in pricing, motivated sellers, that's going to create a lot of buying opportunities.”

Brandon Polakoff, also a principal at Avison Young, pointed out that foreign buyers are responsible for some of the biggest deals of the quarter, a welcome injection of funds for the market.

"My own personal pipeline of things I've been working on, if I didn't have foreign buyers, I would be in a tough spot right now,” he said.

Real estate players have been hoping that buyers would come off the sidelines for some time now, an event likely to happen only if sellers begin to accept lower prices. So far, that isn’t happening, at least not in large numbers. In the meantime, Compass’ Polsinelli said, some brokers are being forced to diversify their work to keep business flowing.

She has started picking up office tenant representation work, something she said she wouldn't have expected “in a million years.”

“But here we are. We have done three very big deals, which, thank God. It was fun to do them,” she said. “The successful brokers are the ones that are nimble — those who can become chameleons.”

On the sales side, she is marketing a building on the Bowery for $6M. A similar building in 2013 would have garnered $13M, she said. Now she is looking to sell buildings for 10 times their rent roll, or $100K per door — a fraction of the typical $500K from a few years ago.

“If anyone has two dollars to put together, they should be buying,” she said. “These are the times where generational wealth is built.”