If I had a billion dollars, I would invest in a Manhattan office building … okay, so maybe the song doesn’t quite go that way, but the first quarter had its fair share of office investors. Through the first three months of 2013, 22 office buildings were sold or went into contract in Manhattan, for a total of nearly $5 billion.
Despite a drop-off from the $5.8 billion in investment sales recorded in the fourth quarter of 2012, when investors and sellers rushed to finalize transactions due to the looming tax law changes, the price per square foot throughout Manhattan spiked this year.
The average price per square foot for 2013 sales is $703, a significant increase from the last two years, when the average price for a Manhattan office property was $537 per square foot. And it is not just one submarket leading this charge, as average prices per square foot in both Midtown South and Downtown are up 30 percent and Midtown is up 24 percent from 2011-2012. At an average price per square foot of $788 in the first quarter, Midtown assets traded at their highest since 2008, when the market averaged $801 per square foot. The $1,200 per square foot that the Chetrit Group and Clipper Equity joint venture paid for the 850,000-square-foot Sony Building at 550 Madison Avenue certainly played a role in this increase.
As a handful of significant trophy assets are on the market and will likely trade at prices north of $1,000 per square foot, this trend is likely to continue, with office investment activity picking up throughout 2013—something that has been missing the past few years. Despite a slowdown in Midtown leasing and investment activity over the last two years, the market will make its comeback soon enough.