The Full Nelson

Massey Knakal's 1H11 Property Sales Report–Institutional Sales Fuel Highest Dollar Volume Since 1H08

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Massey Knakal has just presented our 1st Half 2011 Property Sales Report for New York City. Our company tracks every sale which occurs in the Bronx, Brooklyn, Manhattan, Northern Manhattan, and Queens. Our sales force of 50 agents help compile this information throughout our four offices. As a result, we have detailed comparable sale and trend information for all property sales in the area.

We reported that 1H11 had the highest dollar volume in sales since 1H08 with a total of $12.6B. This was a 52% increase over 2H10 and a 103% increase over 1H10. Manhattan accounted for the bulk of this volume with $11B in sales, an increase of 56% from 2H10 and 124% from the same period last year. Thus far, there have been 960 properties sold, up 15% from the same period last year, representing an annualized turnover of 1.16%.

These figures are still well below the peak. In the first quarter or 2007 alone, there was over $20B in sales. Turnover was also running at close to 4%.

Within the different markets Massey Knakal tracks, the Bronx has outpaced all other markets when compared to the previous year. The Bronx has seen 114 buildings sold in 1H11, up 18% from 2H10 and 21% from 1H10.

In Manhattan, the average price per property was $39m, primarily boosted by the large trades occurring in the office sector.

As far as pricing in the individual asset classes, 1-4 Family Manhattan townhouses sold for an average of $1,611/SF, up 20% from 2010. The average sales price was $8,034,558 in 2Q11. The highest sale was 117-19 East 69th Street for $23,000,000. Meanwhile, 20 East 10th Street registered the highest $/SF at $3,322.

Manhattan elevatored apartment buildings traded at an average cap rate of 4.35%, improving from 2010's 4.84% average. However, the cap was still off 1H06's peak at 2.8%. The average $/SF was $616, up 40% from $438 in 2010. Noteworthy sales included the Corner residential condo at 200 West 72nd Street for $209m which represented a mid 4 cap and a near record of $1,066,327/unit.

Manhattan walk-ups also faired well with 40 sales averaging a 5.27% cap rate compressing from 2010's 5.78%. The $/SF of $551 was also a step above 2010's $525.

Mixed-Use building cap rates averaged 6.28%, which essentially matched 2010, whereas the $/SF was $660, down 11% from 2010 There were 29 retail properties which also sold for an average cap of 6.68%. The $/SF average in 1H11 was $1,476, up 26% from 2010.

In office, there were 28 sales for a total of $5.4B (excluding recapitalizations), an increase of 40% from 2H10 and up 47% from 1H10. Cap rates averaged 5.24%, which showed an increased performance from 2010's 6.40%. The $/SF in 1Q11 was $647, up 21% from 2010. 1633 Broadway was the largest sale at $980m or $833/SF. A small office building at 123 West 79th Street also barely broke $1,000/SF, but it was still off the all time high achieved at 450 Park Avenue for over $1,500/SF.

The hotel segment showed the strongest signs of improvement. There were 14 sales worth $2.4B, up an impressive 170% from 2H10 and 73% from 2010's total dollar volume. The sales averaged $429,089/key, up 12% from 2010. The high point in this category was the Lehman Estate buying back the On The Ave Hotel at 1270 Broadway for over $715,000/key.

Finally, 25 development sites sold for a total of $402m, which was on par with 2H10 and1H10. The average $/BSF was $301, which was in line with 2010. A post correction record price point was achieved in 2Q11 with a small corner site on Spring Street trading for $651/BSF.

In all, New York City is on pace to have over $25b in sales this year, which is 75% more than 2010 and 305% more than 2009. Sales over $50m accounted for $7b of the total volume compared to $4b in all of 2010. Manhattan's average prices rose 11% over 2010 on a per square foot basis. Can this pace continue?

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