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Commercial asset sales rebound in 2018

Deals involving significant commercial assets have picked up through the midway point of the year on a surge in industrial property sales and a rebounding Manhattan office market, Real Capital Analytics (RCA) reports.  

Overall sales transaction volume of properties valued at $2.5 million or more clocked in at $118.8 billion in the second quarter, which was up 2 percent compared to the same quarter last year and the second consecutive quarter with a sales volume gain.

commersales“If you look deeper, you will see that one of the issues is that single-asset sales are still falling, but what really drove growth was one-time portfolio or entity-level transactions,” RCA Senior Vice President Jim Costello told Scotsman Guide News. “I think we are at an interesting point where we are off of the peak levels, but not necessarily falling forever.”

Industrial property sales totaled $18.2 billion in the second quarter, which was up 17 percent year over year and a record for the second-quarter, according to RCA data. A total of 1,643 industrial properties were sold in the quarter, which was up 2 percent. All the other major sectors saw a decline in the number of properties changing hands compared to the same quarter a year earlier. The popularity of industrial sector properties has been driven by internet commerce, which has shown an insatiable need for warehouse and distribution space, Costello said.  

The Manhattan office market also picked up steam through the first half of the year after going cold last year. Some of the shift has involved a big decline in Chinese investor activity. Across the U.S., Chinese investors were net sellers of commercial real estate in the second quarter for the first time since 2000, RCA reported.The Chinese pullback has likely lowered the price expectations of sellers, which has, in turn, spurred more deal activity there, according to Costello. He noted that Chinese investors were often the top bidders on trophy properties during their peak activity in 2015 and 2016.

Manhattan regained its top spot from Los Angeles as the nation’s most active commercial market, recording $15.8 billion in sales in the first half of the year, up 48 percent compared to the same six-month period in 2017. Manhattan office property prices are now down by 20 percent compared to the peak. Overall commercial prices in Manhattan have fallen about 6 percent from the peak level. That has likely brought investors back to the city, according to RCA.

The nation's biggest deal of the first half of the year was in Manhattan where Google spent $2.4 billion to purchase Chelsea Market, a mixed office and shopping center on Ninth Avenue. Other big office property deals in the city included the $700 million Saint Johns Center in the West Village; the $640 million office tower 5 Bryant Park on Sixth Avenue; and $633 million, 50-story office tower at 1745 Broadway.


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