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.