The Manhattan office investment market had another stellar year in 2014, with 119 office buildings sold, 35 of which were partial-interest sales. Sales volume totaled over $19.3 billion, marking the second year in a row that investment dollars fell just shy of $20 billion. Also for the second consecutive year, Midtown South had the most properties traded, with 56 in 2014. Leasing demand and low available supply in recent years has made this a sought-after market for investors. Only three buildings traded for over $1 billion compared with four in 2013, as there was a lack of prime buildings in Midtown offered for sale. This lack of prime sales supply dropped the average price per square foot in 2014 to $736 per square foot versus $803 per square foot in 2013.
Lack of Class A quality sale offerings kept the Midtown office investment sales market at a modest pace in 2014. Only 44 properties changed hands totaling $11.8 billion, down from the 48 buildings sold in 2013, totaling over $14.4 billion. Midtown was the only one of the three major markets in Manhattan where the average sales price per square foot dropped, dipping 4.6 percent to $918 per square foot in 2014 from 2013. Midtown did have three billion-dollar sales as 5 Times Square sold for $1.5 billion, 60 Columbus Circle traded for $1.3 billion and 1345 Avenue of the Americas had a partial interest sale worth $1.2 billion.
Midtown South investment sales continued to soar in 2014, and more than doubled 2013 totals with over $4.3 billion in volume. The average price per square foot jumped 8.6 percent in 2014 to $702 per square foot. Of the 56 buildings sold in Midtown South, 21 of them were sold for over $1,000 per square foot. The largest investment for 2014 was the $778 million partial interest purchase of 388-390 Greenwich Street by SL Green Realty Corp., more than double the amount paid for any other Midtown South office sale in 2014.
Similar to the Downtown leasing market, the Downtown investment market can be considered a value play for investors. Investment volume totaled $3.1 billion and although the average price per square foot increased 9.1 percent in 2014 to $434 per square foot, Downtown still offers lucrative investments compared to Midtown and Midtown South. The most notable Downtown investment was 1 Wall Street, which traded for $585 million and is slated for residential conversion.
Richard Persichetti is vice president of research, marketing and consulting at DTZ.
