Manhattan Investment Sales Sank in ‘08, Says C&W

Not even high-flying New York City escaped the debilitating grip of the credit crunch and the souring economy last year, and the numbers in a newly released fourth quarter 2008 Manhattan market report by Cushman & Wakefield Inc. tell the story. “Sales prices have dropped, but the biggest difference is in volume,” Jon Caplan, executive vice president with Cushman & Wakefield, told CPN. Commercial real estate price tags fell 30 percent, and transactions plummeted a whopping 60 percent, going from $47.7 billion in 2007 to $19.6 billion in 2008. Sixty-five percent of the deals that closed last year were in the office market, which experienced a significant downturn in fundamentals. Fourth quarter asking rents decreased 4.8 percent, the largest drop in two decades, and sublease space jumped 132 percent to 8.2 million square feet. The average vacancy rate rose from 5.7 percent to 8 percent, and it is on target to increase even more; Cushman & Wakefield predicts that it could reach as high as 11.5 percent in 2009. The situation, however, is not as grim as numbers may indicate. “The good news is we’ve had so little development over the past two decades, so we’re in good shape on the supply side,” said Caplan. “I expect that a year from now, we’ll be feeling the worst is behind us.” Of the $19.6 billion in transactions in 2008, 12 percent involved multi-family properties. In the fourth quarter, condominium pricing dropped 11.5 percent from its peak in the second quarter of 2008, and luxury condominium pricing suffered an even bigger decline, plunging 18.8 percent from its peak in the first quarter. “The residential market is being affected by what’s going on in the employment market,” Caplan said. “But the inventory was so tight; there’s a slowdown in activity and a decline in prices, but we anticipate recovery will happen relatively quickly.”