Investment Sales: Reasons for optimism in the 2nd half of 2021 - by Ron Cohen

While there are still variables driving a lackluster market environment for commercial property sales in New York City, there are a few indicators pointing towards greater transaction activity in the second half.

Vacancy rates across several property types are falling or nearing their highs. Rent levels for multifamily properties are also close to what they were pre pandemic. Meanwhile, some office buildings receiving tax reductions and/or abatements are expected as a result of lower revenue in 2021.

Investment sales numbers in NYC are starting to rise. Investment sales transactions in the second quarter of 2021 increased 20% from the first quarter and 16% from 2Q20. Dollar volume for investment properties continues to vary quarter over quarter with 2Q21 ending with $4.7 billion citywide, an increase of 104% from 1Q21. The number of apartment buildings sold in 2Q21 was twice the trailing four-quarter average wherein a total of 28 buildings changed hands. The potential increase in capital gains tax and loss of the 1031 exchange is causing concern and greater impetus to sell for those on the fence.

Price per s/f citywide saw a positive uptick, primarily from the retail and office sectors that pushed pricing to $550 through the second quarter. While pricing has risen from the drop in 2Q20, it still remains below 2019’s year-end average of $629. On the national level, RCA reports, U.S. commercial property prices didn’t collapse because of the pandemic, with price growth merely slowing down temporarily. In Q2 2021, the company’s national all-property index stands at a record high, fully 120% higher than what was experienced immediately after the Great Financial Crisis.

Weekly NYC hotel demand hit its highest point in July since before the pandemic. The nearly 500,000 room nights sold for the week of July 12 represents an increase of 3.5% from the prior week. The report predicted an average occupancy level for hotels of 43% for the first half of 2021, an increase from the average 35% recorded in 2020.

Ron Cohen is the chief sales officer at Besen Partners, New York, N.Y.