Driven by the first billion-dollar office trade in three years, Manhattan's commercial real estate sales market nearly hit the $5B mark in the third quarter for its most active period since early 2022.

Roughly $4.9B of properties traded hands in the borough, up 191% from Q2 and 54% from a year prior, according to an Avison Young report provided exclusively to Bisnow.

Half of those deals came in the office market, highlighted by the largest office sale in Manhattan in three years with RXR and Elliot Investment Management’s purchase of 590 Madison Ave. for $1.1B from the State Teachers Retirement System of Ohio.

“The flywheel has started moving,” said Erik Edeen, a principal and senior director of U.S. investment sales at Avison Young. “Barring any more black swan events that we've seen over the past handful of years, the market should be fully in recovery mode and in growth mode for the year ahead.”

The brokerage estimates that the total overall dollar volume for 2025 will work out at $12.3B, up 9% from last year.

Investment sales in NYC’s development sites and office towers had a comeback in the third quarter of the year, overtaking multifamily and retail and reestablishing themselves as leading asset classes. Institutional capital led on both buy and sell sides, signaling faith in the city’s commercial real estate market as a safe investment.

In the second-largest trade of the quarter, Norges Bank Investment Management and Beacon Capital Partners bought 1177 Sixth Ave. in September from Silverstein Properties and California State Teachers’ Retirement System for $572.3M.

“For an institution to consider selling, they need to be convinced that there's a real buyer pool,” Avison Young Principal and Head of U.S. Investment Sales James Nelson said. “That's now been established, so this should lead to other large-scale offerings.”

The third-largest office deal to close in the quarter was Vornado Realty Trust’s $218M acquisition of Cohen Brothers Realty’s 611 Fifth Ave., where Saks Fifth Avenue is planning to close its outpost at the end of the year and the REIT is proceeding with a planned residential conversion.

Seeing institutional capital return to the market on both buy and sell sides will likely lead to more transactions, Nelson said.

“It shows confidence when you have institutions that are making big bets on New York,” Nelson said. “That improves the psychology in the whole market.”

Another sign of growing optimism: Development sites’ dollar volume rose by 1,993% quarter-over-quarter, putting 2025 on track to be the most active year for land trades since 2018, according to Avison Young.

Naftali Group’s $810M purchase of the apartment building at 800 Fifth Ave. from Spitzer Enterprises and Winter Properties was the driver of that jump. Naftali plans to build a luxury condo tower on the site.

The other two biggest development sales were outer borough sites with 421-a tax breaks. Lightstone Group netted $84M for an empty former bus depot at 355 Exterior St. in Mott Haven where Beitel Group plans to build 755 apartments, and Yitzchok Schwartz paid $54.3M to acquire Ian Bruce Eichner's controversial site next to the Brooklyn Botanic Gardens.

But those types of shovel-ready sites will become scarcer following the tax break's end, Edeen said. Instead, investors are increasingly turning to outer borough development sites that can be split into 99 units or smaller as they digest the 485-x tax break.

“They'll definitely burn off,” Edeen said. “Despite 485-x not being as well-regarded as 421-a, there's still a lot more of that happening. It's just happening in bite-sized chunks.”