NEW YORK, NY – January 31, 2024 – January 31, 2024 – Manhattan saw $11.1 billion in investment property sales in 2023, a 45% decline from 2022 and the worst year in the past decade, excluding 2020, according to Ariel Property Advisors’ Manhattan 2023 Year-End Commercial Real Estate Trends report. Transactions also fell 33% year-over-year to 280.

“Looking back at 2023, investors maintained the same conservative approach to the market as they’ve held since 2021, expressing concern about higher interest rates, rising expenses, and apprehension over the potential expansion of residential rent regulation,” said Howard Raber, Director, Investment Sales, for Ariel Property Advisors. “Development site sales volume remains very light and the price per buildable square foot is hovering around levels that make this asset class attractive to those looking to capitalize on record residential demand amidst persistent underbuilding.”

Senior Director Chris Brodhead added, “Hotel sales were a bright spot in 2023 with the highest level of sales and pricing since 2019. The robust performance of the hotel sector is coming at a time when average daily rates peaked in October/November at $362 (up sharply from $291 for the same period in 2019). The driving forces for the hotel market may be attributed to an increase in tourism as well as supply constraints due to the special permit requirements for new hotel construction, regulations for Airbnbs, and housing for incoming migrants.”

Founding Partner Mike Tortorici added, “The Manhattan office market saw a 58% year-over-year decline in dollar volume to $2.87 billion across only 24 transactions, and the price per square foot fell 22% to $848. Although office occupancy has risen citywide, Class A+ buildings are proving to be the most resilient, showing average visitation rates of 72% of pre pandemic levels.”

Commercial

      •  Manhattan commercial property sales (including hotels and retail) totaled $3.45 billion in 2023, a 41% increase year-over-year, however, transactions dropped 40% to 47 over the same period.
      •  Hotels reached close to $2 billion in sales in Manhattan, the highest level since 2019. The $1,103 average price per square foot represents the highest in four years.
      •  The spike in dollar volume can also be attributed to Italian luxury fashion house Prada’s owner-user acquisition of 720-724 Fifth Avenue for $822 million. Prada has been renting the retail space at 724 Fifth Ave for a number of years and reportedly was set to pay $25 million annually for that space.

Office

      •  Office building sales fell 58% in dollar volume to $2.87 billion, and transactions dropped by 50% to 24 in 2023 versus 2022.
      •  A substantial portion of the dollar volume traded last year was linked to the $1 billion partial interest sale of the 1.7 million square foot property at 245 Park Avenue in June by SL Green to the Japanese firm Mori Trust.
      •  Some owner/users took advantage of the weaker market including Wells Fargo which acquired its own space in 2023, purchasing 20 Hudson Yards Companies from The Related Companies for $408 million ($1,333/SF).

Multifamily

      •  In 2023, Manhattan multifamily dollar volume totaled $2.7 billion across 163 transactions, declines of 64% and 31%, respectively, from 2022.
      •  Of the total dollar volume, 84% was spent on multifamily properties with 10+ units, most notably the 321-unit elevator building at 265 East 66th Street bought by GO Partners from Solow Building Company for $419,000,000 ($820/sf).
      •  Average pricing for all multifamily properties in 2023 was $722/sf with an average cap rate of 5.24%, the highest levels in the past four years for both metrics, but at a much lower basis when compared to pre-pandemic pricing.

Development

      •  The expiration of the Affordable New York Program, rising interest rates, and increased construction costs continued to curb development, which experienced a 45% decrease in aggregate spending to $1.48 billion in 2023 compared to 2022 and 80% less compared to the peak in 2015. The same factors affected the construction pipeline with just 23 permits filed in Q3 2023, a low for Manhattan.
      •  At $390/BSF, the price per buildable square foot represents the lowest average price per buildable square foot since 2010. However, it’s worth noting that the very low sample size of transactions makes this figure especially volatile. If we included an outlier transaction that took place at 500 West 14th Street, which Hyundai purchased for $2000 per buildable square foot, this average would increase to $514.

To read the full report, please click here.