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NYC Suffers Significant Drop in International Investment

Peter Hauspurg Peter Hauspurg, chairman and CEO of Eastern Consolidated

NEW YORK CITY—Total investment sales volume and international investment property sales fell sharply last year in Manhattan, a sign of a market in transition.

Brokerage firm Eastern Consolidated in its 36-page “View From the Street” annual report on the 2017 Manhattan investment sales market notes that overall investment sales activity in Manhattan fell 41% in 2017 to $23 billion as compared to a year earlier. In fact, last year’s investment sales volume was the lowest since 2010 when sales in Manhattan totaled just $14 billion.

“The slowdown is a reflection of a turning market, and when a market turns there tends to be a lull in sales activity as buyers and sellers adjust their expectations,” says Peter Hauspurg, chairman and CEO of Eastern Consolidated.

A major source of investment capital in 2016 was international players based in China, Germany, Canada, Hong Kong and Israel for example. Eastern Consolidated reports that there was a “significant retrenchment” in 2017 by international investors who recorded more than $1 billion in investment property purchases in Manhattan the previous year.

While international investors still accounted for 35% of all investment property sales in Manhattan last year, this sector’s market share fell from a 42% market share in 2016 and 46% in 2015.

Last year’s pullback by international investors followed a 37% decline in overseas investment in 2016 when total international investment in Manhattan was $17.58 billion. Foreign investment in Manhattan real estate hit a peak of $27.9 billion in 2015, according to Eastern Consolidated.

Chinese buyers invested $2.5 billion in Manhattan commercial real estate in 2017, a 62% decline from the previous year; German buyers invested $838.5 million, a 64% decline; UK buyers invested $188 million, an 87% decrease; Canadian buyers invested $1 billion, a 19% decline; and buyers from Hong Kong invested $547 million, a 55% decline. In addition, Israeli investment fell 74% year-over-year to $180 million.

In terms of other sources of capital, REITs’ market share rose sharply from 3% in 2016 to 15% last year. Another sector that saw its market share fall was institutional buyers, which accounted for 19% of the sales last year, a sharp decrease from 2016’s market share.

The Midtown West section of the borough earned the top spot for the second year for investment sales at $5.1 billion. Other bright spots were the West Village and Chelsea that Eastern Consolidated reports secured more investment sales dollars in 2017 than the previous year. The West Village enjoyed a 146% spike in dollar volume to $1.16 billion, while Chelsea registered a much more modest 8% increase in dollar volume to $2.1 billion. All other Manhattan neighborhoods saw year-to-year declines in investment sales in 2017 as compared to the previous year.

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