Contact Us
News

Beyond China: NYC Investment Sales Market Looks For Its Next Big Spender

Want to get a jump start on upcoming deals? Meet the major New York City players at one of our upcoming events!

The nearly $50B investment sales market was fueled by domestic capital last year, but as China has pulled back as the dominant buyer, other countries have stepped into the void.

NYC skyline
New York City skyline

Foreign investors bought just over $8B worth of commercial properties in New York City last year — slightly under 20% of 2018’s total sales volume of $45B, according to Avison Young figures. That represents a 50% decrease from 2015, when overseas buyers accounted for almost 40% of total volume.

Canada was the dominant overseas buyer last year, with 41% of all offshore investment, followed by Germany and The Netherlands, according to Avison Young's analysis of Real Capital Analytics data.

The slide down from 2015 is largely due to Chinese investors’ exit as that country continues to impose regulations on offshore spending. Investors from China are expected to continue to sell more real estate than they buy around the globe this year, which could dampen prices.

But brokers say there are still plenty of overseas buyers in the market — they just may not be making the flashy, headline-grabbing, billion-dollar purchases. Local operators are stepping up too, they said.

“Last year, it has really been the year of the domestic investor,” head of Tri-State investment sales at Avison Young James Nelson said while presenting the firm’s year-in-review report Thursday. “China always gets all the headlines, but Canada has been a consistent top three investor, easily for the last 10 years, probably for the last 20 years.”

There are several other high-profile foreign exits happening right now grabbing a lot of attention. The famed Chrysler Building, which is majority owned by the Abu Dhabi Investment Council, is on the market, and the Abu Dhabi Investment Authority is looking to sell its 75% interest in 330 Madison Ave.

Meanwhile, China’s HNA Group is retracting from the market, selling office tower 850 Third Ave. earlier this month to Jacob Chetrit and his sons for $422M and a $148.2M stake in 245 Park Ave. to SL Green last year.

Japan’s Unizo Holding Co., which began picking up Manhattan properties in 2013, has been shedding assets, too. Last month it took a loss when it sold a Hell’s Kitchen property to Related.

Avison Young investment sales broker James Nelson
Avison Young Tri-State head of investment sales James Nelson

Nationally, Anbang Insurance is looking to offload a $5.5B hotel portfolio it bought two years ago — though it plans to keep the Waldorf Astoria Hotel in Manhattan, for which it paid an eye-popping $2B in 2015.

While the headlines tell one story, some in the market suggest there is a lot of foreign activity still going on under the radar.

“Chinese investors pulling out, that’s just one issue. There are so many others coming,” Compass Vice Chair Adelaide Polsinelli said.

Polsinelli said she recently sold a group of downtown retail properties to a Chinese entity, and right now she has a Russian investor bidding on a property in the $100M range, as well as a buyer from Singapore looking at a development site and four buyers from the Middle East interested in some Midtown retail assets.

“There are a lot of Japanese buyers coming in — we’ve seen Singapore, Russia and other countries," she said. "It’s not impacting the entire universe of property … [and] not every investor is pulling out. The smaller investors are here and there are Chinese banks here still in business.”

Across the United States, foreign buyers are increasingly moving away from flashy purchases and into secondary markets in order to capture yield. Polsinelli said there are plenty of those kind of offerings in New York City — and the foreign investors are still keen on the middle part of the market.

“We have [Class-]B office buildings. We’ve got residential properties — there’s the whole industrial market,” she said. “While they are not as sexy, they do turn a profit if they are financed properly, tenanted and managed.”

 

Beyond China: NYC Investment Sales Market Looks For Its Next Big Spender
Terminal Stores

As a whole, the city’s investment sales market picked up from last year, although it was still below the market's cyclical peak in 2015. The dollar volume increased 35% from 2017, and while it didn't sniff the $76B that traded hands in 2015, it was above the decade average of $41B.

CBRE First Vice President David Fowler, who is on the team selling the Chrysler Building, said domestic capital fueled last year’s market. Certainly, many of the blockbuster deals of 2018 came from homegrown buyers.

Google paid $2.4B for Chelsea Market — the biggest sale of the year, and one of the biggest in New York City history — and Silverstein Properties paid Disney $1.2B for ABC's Upper West Side headquarters. L&L Holding Co. and Normandy Real Estate Partners dropped $900M on the Terminal Stores, also in Chelsea.

Overseas buyers still want New York assets, Fowler said, adding there has been global interest in the Chrysler Building.

“I think there is plenty of appetite from the global capital side. In general they compare investment opportunities internationally,” he said. “They are looking at how London compares to New York, how Frankfurt compares to Hong Kong. As a result of that, there are many groups that remain incredibly focused on New York.”

JLL Chairman of Investment Sales Bob Knakal said a pullback from one country is usually followed by the advance of another.

"If you look over the last 30 years, there have been periods of time when Japan was dominant, or the Irish or Germans — all the while Canada has been very consistent in the amount of capital, and we expect that to continue,” he said.

JLL’s figures indicate that in the New York market in 2015, 2016 and 2017, the percentage of foreign investment hovered at 42%. In 2018, that figured dropped to 24%, Knakal said. But take a step back and look at the market over the last decade, and that’s an impressive figure.

“Five or six years ago, if you said that in 2018 foreign investment would make up 24% of the marketplace, everyone would have loved that number,” Knakal said.

CORRECTION, JAN. 27, 5 P.M. ET: The Abu Dhabi Investment Council owns the majority stake in the Chrysler Building. An earlier version of this story misidentified the name of the entity. This story has been updated.