Down, Down, Down: Investment Sales Slump for Third Consecutive Quarter


In a conversation with a good client last week, I told him that the investment sales market was just kind of slogging along without any substantial traction at this point in the recovery. He was surprised by my comments and pointed out that he felt the market was “great” because values were rising, and, as such, the value of his portfolio was way up.

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blitt bob knakal3 Down, Down, Down: Investment Sales Slump for Third Consecutive Quarter
Robert Knakal.

I pointed out that, as an intermediary, action and activity was much more indicative of the “health” of the market, as sales brokers, attorneys, title closers, mortgage brokers, bankers and operating promoters are primarily dependent upon market activity for their livelihoods. Therefore, for most of us, our perspective on the market is dependent upon the volume of sales, not the direction of property values.

In the first quarter of 2012 (1Q12), the property sales market in New York City continued to perform at essentially the same modest levels seen in the fourth quarter of 2011. The results were disappointingly-not-better, and, simultaneously happily-not-worse.

They were disappointing because we expected a natural gravitation toward long-term trends that should have pulled all markets up from the relatively low levels the market had plummeted to. However, we were happy that things weren’t worse because both the dollar volume of sales and the number of properties sold had been trending lower in recent quarters. That trend is apparently slowing, which is very positive.

In 1Q12, there was $6.9 billion of investment sales transactions, down slightly from the $7 billion in 4Q11. This marked the third consecutive quarterly drop from $8.1 billion in 2Q11. If we annualize 2012’s performance, we’re on track for $27.6 billion in sales for the year, up very slightly from 2011’s $27.4 billion.

Looking at these numbers from a macro perspective, the annualized total would be up 353 percent, or more than four times, from the $6.1 billion in sales we saw in 2009, but remains 56 percent below the market’s $62.2 billion peak in 2007.

The best performing submarket was northern Manhattan, in which 1Q12 totals were $155 million, up 71 percent from 2011 totals, if annualized. This remains 58 percent lower than 2007 peak levels. The Brooklyn market also performed very well in 1Q12 with $684 million in sales, up 61 percent from 2011. The Brooklyn market volume is only 29 percent below the 2007 peak, which is the best performing submarket in the entire city, including Manhattan.