NYC’s Real Estate Market Is Going From ‘Defense to Offense’ in 2025

When the game is on the line, New York City’s real estate market tends to rally (unlike the Giants or Jets).

Despite a challenging post-COVID-19 recovery, high interest rates and onerous development regulations, New York City’s investment sales jumped to $28.3 billion for 2024, a 26 percent rise compared to 2023, according to highlights from Ariel Property Advisors’ 2024 year-end sales reports. 

“Last year, we saw only $350 billion worth of transactions nationwide. That’s the lowest amount in the past 10 years,” Shimon Shkury, president and founder of Ariel Property Advisors, said at the firm’s biannual Coffee and Cap Rates breakfast held Wednesday. “New York City, however, did better — $28 billion, that’s growth. That’s not [enough of] what we need to see in the city of New York, but it is a step in the right direction.”

Drivers of this growth were stronger investment sales fundamentals, as well as the new housing policies passed by the city and the state, which made the road to new development less bumpy. 

The city’s office, development, and multifamily sectors all saw significant market activity throughout 2024, according to the Ariel data. There was an increase in dollar volume of $5.43 billion in the office asset class across 98 deals, a 63 percent year-over-year increase. Ariel noted this doesn’t include the $1.5 billion, or 5.8 million square feet, in office-to-residential conversion sales. 

The increased return-to-work movement is playing a role in the resilience of the office asset class, as more employers now require employees to have a more regular presence in the office. 

“High-end corporations — the hedge funds, financial institutions, law firms — want to create a corporate culture and maintain employee retention,” Shkury said. “They are looking for the amenitized buildings, and they’re looking for a clublike environment.”

Development saw $5.52 billion in dollar volume over 329 transactions, a 53 percent year-over-year jump. The multifamily asset class saw $8.9 billion in transaction volume for 2024, a 14 percent bump from 2023.

“The multifamily asset class has grown in terms of volume, not a lot, but again, it is a step in the right direction,” Shkury continued. “It’s probably the preferred investment in New York City.” 

New York City is facing a significant housing crisis, with the city recording a historically low vacancy rate of 1.4 percent. That, coupled with the high cost of living and stagnant wages, makes the need for affordable housing great. However, affordable housing accounted for only 8 percent of dollar volume and 5 percent of transaction volume last year, according to Ariel research. 

There is a supply constraint for affordable housing, especially considering that rent-stabilized sales accounted for 29 percent of multifamily dollar volume last year. 

Although 2024 wasn’t a great year for affordable housing, it is possible that could change in 2025 thanks to city and state initiatives like the City of Yes rezoning efforts and the 485x tax incentive program.

“We see transactions because of preservation deals, deals that mostly need new capital to provide for the higher quality of affordable housing,” Shkury said. “In affordable housing in general, we see a lot more alignment. We see government and mission-driven capital working together, where the government provides a lot of incentives to provide that quality affordable housing.”

Looking toward the rest of 2025, Shkury is bullish on New York City’s commercial real estate market.

“We believe that in 2025 we’re going to see more transaction volume and some pricing recovery,” Shkury said. “We started seeing that last year with very specific segments and very little recovery. But we believe this year is going to be a bigger one. One of our clients told us that this year is moving from defense to offense, and I think that sums it all up.” 

Amanda Schiavo can be reached at aschiavo@commercialobserver.com.