Manhattan’s office sales market is booming despite a sluggish leasing climate that has kept vacancy high. A new report from New York-based Insignia/ESG shows that the volume of Midtown office sales as of Nov. 1 was up 14% compared with all of last year. Most of the sales have been Midtown office buildings, where 26 sales have taken place so far this year.

"Investor interest in commercial real estate as an attractive long-term alternative is prevalent, especially because there’s a paucity of product available, financing options are rampant and inexpensive and there’s still very little new construction coming on line," says Richard Baxter, executive managing director of Insignia/ESG’s Capital Advisors Group.

Sellers are fetching record prices for their properties. Sale prices are up 10% from last year’s average. Class-A, well-leased buildings are still the most sought after by investors. The only Class-B properties that have achieved returns in line with sellers’ expectations are those with very low vacancy.

Only three buildings have sold in Lower Manhattan to date this year. Insignia/ESG reports that 12.4 million sq. ft. traded last year for $3.75 billion, yet only 1.49 million sq. ft. changed hands since January for a total of $223.5 million. Prices for downtown office buildings have dropped 50% since last year, according to the report.

Two midtown sales — 399 Park Ave. and 717 Fifth Ave. — have set benchmarks for office sales prices. Boston Properties acquired the former from Citigroup for $1.06 billion, or $631 per sq. ft. The Fifth Avenue building, which was sold last week, traded at $266 million, or $611 per sq. ft.

This slew of high-priced building sales is in stark contrast to an abysmal leasing climate in Manhattan and across the country. Manhattan office rents have declined by as much as 25% over the past two years.