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Key Takeaways:

  • Q3 closes with sales below $1 billion for the first time in 5 years
  • Average prices rest below $1,000 per square foot
  • 375 Hudson Street trades for $465M in largest deal of the quarter
  • Roughly 3MSF of office space scheduled for delivery during Q4

Office Sales Volume Drops 67% Y-o-Y

According to the latest quarterly report released by our sister company COMMERCIALCafé, sales activity on the Manhattan office market has continued to slow down through 2017’s third quarter. Sales dropped 67% year-over-year, as well as falling a steep 74% compared to the previous quarter. Amassing an office sales volume of $991 million, and logging the fewest quarterly deals closed in the past five years, the market’s Q3 2017 performance is further indication that Manhattan office sales might be going through a cooling-off period.

Average Price per Square Foot Rests at $821 in Q3

The average price per square foot for office buildings sold on the Manhattan market during Q3 2017 slid back below the $1,000 mark, resulting in a 19% year-over-year drop. Although consistent with the sales volume trend, this drop is likely not a sign that Manhattan office investment is losing its allure, but rather a consequence of reoccurring market fluctuations.

Trinity, Norges Make Largest Buy of the Quarter

375 Hudson Street (PropertyShark)
375 Hudson Street (PropertyShark)

The 1 million-square-foot high-rise at 375 Hudson St. commanded the highest price tag of the quarter. Trinity Real Estate and Norges Bank partnered in the $465 million office acquisition of the Tishman Speyer property. This sale was one of six large deals to close in Manhattan during Q3, and accounted for nearly half of the total sales volume recorded between July and September of 2017.

Six Office Projects in Q4 Pipeline

While only one office building larger than 50,000 square feet came online in Manhattan during Q3, there are six projects totaling 3 million square feet in the pipeline, scheduled for completion during this year’s final quarter.

Notable developments include Stellar Management’s One Soho Square, a mixed-use project set to include two 13- and 15-story buildings incorporating retail, office space, and a 26,000-square-foot showroom.

The 42-year-old Verizon Building at 375 Pearl St. is also getting a glassy makeover—the tower’s grey facade is being replaced with floor-to-ceiling glass curtain walls. Upon completion of the extensive renovation efforts, the property will be open for use as office space and data storage.

Methodology:

COMMERCIALCafé compiled the Q3 2017 office report based on PropertyShark and Yardi Matrix sales data, analyzing transactions of properties equal to or in excess of 50,000 square feet, and closing for over $5 million. The data analyzed for this report spanned 5 years from July 2013 to 2017, and includes sales recorded as late as October 9th, 2017. Ownership stake deals, ground lease and portfolio transactions were excluded from the calculation of the average price per square foot. In the case of mixed-use assets, only properties encompassing over 50% office space were taken into account.

Read the full Q3 report on the COMMERCIALCafé blog.

Ioana Ginsac

Ioana Ginsac

Ioana Gînsac is a real estate writer covering all-things-CRE, including industry news, U.S. office and industrial market reports, features on development, architecture, urbanism, proptech, design, and more. Her work has been featured by AmericanInno, Bisnow, BusinessInsider, Commercial Property Executive, Curbed, Fast Company, Forbes, GlobeSt, Inc, Patch, The Real Deal.

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