Sales? More Like Snails!
Dana Rubinstein Oct. 13, 2009, 3:04 p.m.
The commercial real estate cataclysm has proven false yet another real estate truism: the long-held belief that even in the most desertlike of investment sales markets, at least 1.6 percent of the 27,649 elevator and walk-up apartment buildings and retail condominiums and office buildings in Manhattan will sell every year, thanks to unavoidable (and generally unfortunate) reasons like death, divorce and the dissolution of business partnerships.
“We’re going to break through that 1.6 percent floor,” said Robert Knakal, chairman of Massey Knakal Realty, during his firm’s third-quarter sales call on Tuesday morning. “If we look at what has transpired this year, in the first three quarters, turnover is running at about 1 percent.”
Mr. Knakal expects the year to end with a turnover of 1.2 or 1.3 percent.
“The lowest turnover that we’ve ever seen was 1.6 percent, which was achieved in 1992 and 2003,” Mr. Knakal said.
In fact, only 209 commercial real estate properties below 96th Street on the East Side and below 110th Street on the West Side sold in the first three quarters of this year, down 60 percent from 2008 and down 75 percent from 2007.
And those buildings that are selling are kind of on the embarrassingly small side (from a real estate perspective, at any rate), with 92 percent selling for less than $25 million and the average sales price settling in at $15.3 million.
On the upside, 1992 and 2003, those two aforementioned hellish real estate years when transaction volume hit the no-longer-impermeable 1.6 percent bottom, also marked the ends of recessions. So, Mr. Knakal said, this bad news could have something of a bright side: “We think we’re past the bottom in terms of the dearth of volume that we’re going to see in the marketplace.”