Manhattan’s commercial-property sales are stirring from a two-year slump

New York’s commercial real estate market is crawling out of a slump.

In the first half of 2018, US$22.5 billion of properties such as office towers and apartment complexes changed hands, up 34 per cent from a year earlier, data from brokerage Cushman & Wakefield show. The pace is running far behind the US$38 billion of deals completed during the first six months of 2015.

Buyers and sellers are slowly coming to terms following a two-year stand-off. After a record surge in property values following the recession, especially in big cities like New York, deals fell amid concerns over rising interest rates and a pullback by the foreign buyers that powered the boom. Last year, transaction volume down was more than 50 per cent from the record levels of 2015, according to Cushman.

While those issues haven’t disappeared, “investors, and therefore transaction volumes, are benefiting from less uncertainty in 2018,” said Doug Harmon, chairman of capital markets at the brokerage. “There are geopolitical risks, trade tensions, increased volatility in the equity markets, but these factors often drive even more capital into the safety of the US economy and into prime real estate assets.”

Harmon also cited an abundance of available global capital and interest rates that are still historically low.

A decline in prices is also a draw. Office values are down 9 per cent from a year earlier, while prices for development sites fell 7 per cent, according to Cushman. The biggest loser, consistent with the rest of the US, is retail, with property values declining 15 per cent in the past 12 months, according to Cushman.

There are still blockbuster deals getting done in Manhattan. The largest transaction this year was Google’s acquisition of Chelsea Market for US$2.4 billion, one of the highest prices ever paid for a building in New York.