The first quarter 2014 proved to be interesting for the Manhattan office investment market. Only $3.2 billion in volume was completed, compared to almost $4 billion in the first quarter 2013. Despite the drop in sales volume, 46 properties traded this year, compared to only 18 during the first three months of 2013. Demand for investment properties remained strong, as the average price per square foot did not falter, rising 5.1 percent from 2013, to $812. With only two of the 46 properties sold being Class A, the lack of prime office product on the market for sale is a big reason for the drop in sales volume.
The lack of Class A product proved to be a detriment to Midtown office sales volume, as it dropped 58 percent compared to first quarter 2013. Only $1.5 billion was recorded this year, compared to an average of $3.7 billion traded per quarter in 2013. However, the average price per square foot for sales was up 10.7 percent, at $1,019. The sale/leaseback between Time Warner and Related Companies dominated all transactions, as the condo portion of the building traded for $1.3 billion, or $1,200 per square foot.
In the wake of a slow first quarter for Midtown, Midtown South and Downtown Manhattan picked up the slack. These two markets combined for a total sales volume of $1.7 billion in the first quarter 2014, a 268 percent increase compared to the same time last year, when only $466 million was traded. Both markets witnessed sizeable increases in the average price per square foot: Midtown South rose 17.4 percent, to $796, and Downtown Manhattan increased 22 percent, to $485 per square foot. With Midtown South’s available supply at its lowest level in more than seven years, and the Financial District continuing to attract nonfinancial tenants, expect investors to continue to look toward these two markets throughout the year.