Market Reports

Office Property Sales Double in Second Quarter: Eastern Consolidated

A strong second quarter for investment sales saw office property sales double from the first quarter, jumping from $2.6 billion to $5.2 billion, according to the latest report from Eastern Consolidated.

The largest transaction in the quarter was the partial interest transfer of the GM Building at 767 Fifth Avenue for $1.36 billion

The largest transaction in the quarter was the partial interest transfer of the GM Building at 767 Fifth Avenue for $1.36 billion

As previously noted in The Commercial Observer, a string of recent large office building sales, reflecting increased investor demand for safe, long-term bets, has bolstered the trend.

“What is most striking in the current market are the prices that properties are fetching; investors are competing for prime properties and prices are reflecting the high demand,” said Daun Paris, president of Eastern Consolidated.

The largest office transaction in the quarter was the partial interest transfer of the GM Building at 767 Fifth Avenue for $1.36 billion; and Hines sold two buildings in the quarter – 425 Lexington Avenue to J.P. Morgan Asset Management and 499 Park Avenue to American Realty Advisors – for a total of more than $1 billion.

Recent news suggests that the trend will continue, as Crown Acquisitions and Highgate Holdings reached a deal last month to pay $1.3 billion for 650 Madison Avenue; Boston Properties and its partners recently sold 125 West 55th Street; and Time Warner’s headquarters could soon become vacant.

In total, sales volume in the second quarter increased by 26 percent, from $7 billion to $8.8 billion, Eastern’s Manhattan Commercial Property Sales Report shows. Though not as strong as the $14 billion achieved in the fourth quarter of 2012, $8.8 billion exceeded the quarterly average volume for the last two years.

Though investors remain bullish, momentum shifted at the end of the quarter after an announcement from Federal Reserve Chairman Ben Bernanke signaled potential interest rate increases, which would raise the cost of capital, said Barbara Byrne Denham, Eastern Consolidated’s chief economist.

But, she noted, “A slight shift in yield should not have a significant impact, given the presumption that higher interest rates suggest a stronger U.S. economic recovery characterized by increased job growth.”

Among other findings in the report, multifamily sales volume declined from $2.9 billion in 1Q13 to $1.6 billion in 2Q13; and retail volume hovered around $140 million, similar to the first quarter.

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