Ariel Property Advisors' report shows dollar volume of Manhattan investment property sales up 28% year-over-year

Investment property sales in Manhattan during the first half of 2013 showed a year-over-year jump in dollar volume of 28%, but declines in transaction and property volume of 12% and 9%, respectively, according to Ariel Property Advisors' Manhattan 2013 Mid-Year Sales Report. The report tracks activity south of East 96th Street and south of West 110th Street and transactions $1 million and up. In Manhattan in the first six months of 2013, there were 274 transactions consisting of 351 properties totaling $10.56 billion in gross consideration, compared to the first half of 2012, which saw 310 transactions comprised of 384 properties totaling $8.199 billion in gross consideration. "Although much of the year-over-year growth in dollar volume came from a string of institutional, commercial, and office deals, a resurgence of development site sales also played a key role," said Randy Modell, vice president of Ariel Property Advisors. "Razor thin vacancy levels are driving up rents and condominium prices are rising sharply as buyer demand meets scarce product. Both trends are fueling a tremendous appetite for development site sales throughout Manhattan and are causing prices per buildable s/f to surpass heights achieved during the last cycle." Some sites in prime locations are seeing values north of $600 per buildable s/f with one site in West Chelsea selling for as high as $800 per buildable s/f. "While Manhattan multifamily sales volume dipped in the first half of 2013 compared to the first half and second half of 2012, prices for these properties have risen to the highest levels seen since 2007," said Shimon Shkury, president of Ariel Property Advisors. "We expect strong pricing to bring more properties to market over the second half, possibly prompting some owners who missed out on the last peak to choose to sell during this cycle." First half 2013 statistics showed an expected decline in investment activity for many asset classes from the second half of 2012, which recorded higher than usual volume in response to the expiration of the Bush tax cuts at the end of the year. Compared to 2012's last two quarters, transactions in the first half of 2013 fell 35 percent, the number of properties sold fell 32 percent, and the dollar volume of the trades fell 17 percent. Howard Raber, associate vice president for Ariel Property Advisors, added that second quarter 2013 figures improved dramatically compared to the first quarter of 2013. "The lack of inventory in the first quarter following the surge in closings in December, led to pent-up demand," Mr. Raber said. "Transactions increased in the second quarter, however, when higher-than-average prices encouraged owners to return to the market. We believe this increase in activity will continue for the balance of the year." The following are highlights from the report: Office. Comparing dollar volume of first half of 2013 to the first half of 2012, the market is up 71 percent with $5.85 billion in gross consideration verses $3.43 billion in gross consideration. It is interesting to note that this increase is despite a 40 percent decrease in the number of properties that sold due to more billion dollar transactions taking place in comparison to the first half of 2012 - most notably the General Motors Building at 761 Fifth Avenue (a 40 percent stake sold for approximately $1.4 billion, approx. $1,700/sf); 650 Madison Avenue ($1.3 billion, approx. $2,300/sf); and the Sony Building at 550 Madison Avenue ($1.1 billion, approx. $1,287/sf). The report said it is anticipated 2013 will close with office dollar and sales volume both exceeding 2012 levels. Development Sites. Comparing dollar volume of first half 2013 to first half of 2012, the market is up 105 percent with $1.4 billion in gross considerations versus $683 million. Prime development sites in Manhattan with scale are trading at pre-recession levels, with some sites trading at north of $600 per buildable square foot. Transactions and property sales volume have also increased compared to the first half of 2012. A notable transaction is 239 10th Avenue, which will have access to the Highline, and sold for $800 per buildable square foot. Hotels & Retail Sites. Comparing dollar volume of the first half 2013 to the first half of 2012 the market is up 15 percent with just over $1 billion in gross consideration versus $893 million in gross consideration. This increase is despite a 49 percent decrease in the amount of properties sold and highlights the strong hotel and retail market. The report said it is anticipated this trend will continue and the remainder of 2013 will see higher transactions and an increased number of property sales compared to 2012. Two notable transactions include the 226-room Holiday Inn Manhattan 6th Avenue, located at 125 W. 26th St., which sold for $113 million and the 203-room Alex Hotel, located at 205 East 45th Street, which was sold to a hotel group for $115 million. Multifamily. Rising rents and low interest rates have pushed the average capitalization rate down to 4.46 percent. The average price per square foot is up to $736, the average price per unit is $536,000, and the average gross rent multiple is up to 15.91. Notable examples include 967-971 Columbus Avenue, a 27-unit walk-up building, which sold for $10.1 million ($536/sf); 1546 2nd Avenue, a 15-unit walk-up building, which sold for $9.1 million ($862/sf); and 325 East 10th Street, an 18-unit walk-up building, sold for $8.5 million ($773/s/f).