New York City commercial real estate sales totaled $13 billion in the first half of 2025, with over 50% of the dollar volume concentrated in the "Fabulous Four" asset classes of Class A and trophy office, free market multifamily, affordable housing and retail, according to research published by Ariel Property Advisors.

Class A/Trophy Office: Tenant Demand, Equity Surge and Credit Preference Drive Investment

Sales in the office sector soared by 116% year-over-year, reaching $3.1 billion, with Class A and trophy office buildings representing 74% of this dollar volume.

Investors, ranging from private equity to institutional players are eager to acquire these assets in prime locations due to the premium rents that high-credit tenants are willing to pay for well-amenitized spaces that foster a strong corporate culture. Companies like Deloitte, Jane Street and Apollo Management leased nearly 3 million square feet of office space in Class A and trophy buildings in the first half of 2025, contributing to a significant drop in their vacancy rate—from 17.2% to 10.7%.

Class A and Trophy Office Buildings accounted for 74% of the $3.1 billion in office sales in 1H 2025. Ariel Property Advisors

Nearly 60% of the 1H 2025 office transactions were partial sales, joint ventures, or recapitalizations, and, in addition, over $8.3 billion in refinancing deals were executed. This highlights that owners of Class A office buildings are holding onto their premier assets, with equity investors eager for a piece of the action. Lenders are also flocking to compete for financing opportunities, drawn by the strong collateral these properties offer.

An example of this trend is Fisher Brothers’ 1345 Avenue of the Americas. In the largest deal of 1H 2025, Blackstone acquired a $644 million stake in the building, purchasing a JPMorgan–affiliated investor’s interest. Fisher Brothers increased its majority ownership and refinanced the building with an $850 million CMBS loan from Morgan Stanley, JP Morgan Chase and Citibank. Following a $120 million renovation in 2021, the building now boasts a 92% occupancy rate, with tenants like Paul, Weiss, Rifkind, Wharton & Garrison LLP and Fortress Investment Group.

Free-Market Multifamily: Rent Growth, Low Basis, Promising Future

Multifamily sales in 1H 2025 rose 5% year-over-year to $4.4 billion with free market properties accounting for 57% of the dollar volume. Manhattan (below 96th Street) and Brooklyn generated 95% of the free market dollar volume.

Pelsinger describes Gowanus as “the hole in the donut,” surrounded by amazing brownstone neighborhoods—Park Slope and Boerum Hill in addition to Carroll Gardens and Cobble Hill. Now that hole is being filled with full service, amenitized buildings and a public park along the two mile canal. The Gowanus rezoning is expected to create approximately 8,500 units housing, of which about 3,000 will be permanently affordable.

The drivers for the free market sales include consistent rent growth caused in part by the persistent undersupply of housing that has pushed the vacancy rate to 2.25%, and pricing that is still below the peak. However, beginning last year prices started to rise, signaling that the market has hit bottom and it’s time to invest.

Free market units make up close to half of New York City’s 2.3 million apartments and there are three distinct types of free market multifamily sought after by investors. These include new or 421-a properties; deregulated, larger and older buildings mostly in Manhattan and Brooklyn; and smaller, tax-class protected walk-ups—typically under 10 units in the outer boroughs.

As with the Class A and Trophy office buildings, owners of prime newly constructed free market residential properties welcomed fresh capital from institutional investors in partial interest sales. The following transactions illustrate this trend:

• Ares Management acquired a 75% stake in a luxury multifamily and retail asset at 525 West 52nd Street in Hell’s Kitchen from the building’s developer Mitsui Fudosan America for $202.2 million, assuming a below-market loan and securing long-term value through a 421-a abatement lasting to 2039. Taconic Partners remained in the partnership retaining its 25% stake.
• Steiner NYC recapitalized its 750-unit residential tower at 333 Schermerhorn Street in Downtown Brooklyn by buying out its equity partner JPMorgan Asset Management in a $420 million deal, regaining full control of this high-amenity building. Walker & Dunlap advised Steiner and also arranged $62.5 million in preferred equity from Meadow Partners.

Additionally, institutional and private capital such as A&E Real Estate, Carlyle and Peak Capital invested in deregulated buildings in Manhattan and prime Brooklyn where rent-stabilized units have mostly turned over, while mostly private owners, some international buyers and small partnerships acquired smaller tax class protected buildings.

Affordable Housing: Driven By Mission and Public Incentives

Affordable housing accounted for 20% of multifamily dollar volume in New York City in 1H 2025, driven by high demand, limited supply and incentives. Without public incentives and partnerships, affordable housing can’t be built and existing stock can’t be preserved, hampering the city’s ability to serve low-income residents.

Demand for these assets remains strong from private mission-driven capital, nonprofits and institutional investors that are seeking long-term, impact-aligned opportunities in this space.

However, the supply of affordable housing is limited. These assets aren’t typically financially distressed but require capital reinvestment and renewed incentives every 10 years or so. Operators face a decision each cycle: recommit or exit. As a result, sales are strategic and infrequent.

In the largest affordable housing sale in the first six months of the year, Tredway acquired a 602-unit property at 125 Beach 17th Street in Far Rockaway, Queens, for $88 million, a deal arranged by Ariel Property Advisors. Concurrently with the acquisition, Tredway entered into a new regulatory agreement with the Department of Housing Preservation & Development (HPD), entering all units into rent stabilization and extending their affordability, preventing substantial imminent rent increases. A substantial rehabilitation also is planned for the beachfront complex, primarily aimed at correcting decades of deterioration caused by exposure to the elements and salt spray.

Tredway acquired a 602-unit property at 125 Beach 17th Street in Far Rockaway, Queens, for $88 million, a deal arranged by Ariel Property Advisors.

Retail: High End Locations Magnet to Quality Brands

Retail sales in New York City totaled $1.3 billion in 1H 2025, driven by location, tenant quality and long-term value. These assets attracted two investor categories—large owner-user brands and savvy retail investors.

Larger owner-user deals in the first six months of the year included Uniqlo, which acquired its flagship store at 666 Fifth Avenue for $355 million ($20,526/SF), and Ralph Lauren, which purchased its flagship store at 109 Prince Street in SoHo for $132 million ($13,321/SF) as the lease was ending. They join other retailers like Gucci and Prada that have purchased their stores to secure long-term control and avoid future rent increases.

Institutional investors also remained a key force in the retail market. A notable example included City Urban Realty’s sale of 95-97 & 107 N 6th Street in Brooklyn to Acadia Realty Trust for $60 million. Tenants include Abercrombie & Fitch, Lululemon, Mejuri and Wally, showcasing strong demand for prime retail locations with well established brands.

Looking Ahead

Investment activity in the first half of 2025 paints a clear picture of a market defined by a “flight to quality.“ Across office, multifamily and retail, sophisticated investors, lenders and users are making strategic, long-term bets on premier assets, confident in their enduring value. The prevalence of complex partnerships, recapitalizations and owner-user acquisitions over simple sales demonstrates a deep-seated belief in the future of New York City's top-tier properties.

Content for this article was taken from Ariel Property Advisors’ 2025 Mid-Year Research Reports, which I presented at our firm’s Coffee & Cap Rates event on July 30, 2025. To view the full presentation Investing Through Change, please click here. To access Ariel’s research reports, please click here.

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