Increased availability of debt and an uptick in office rents drove demand for large Manhattan office towers in 2013. The top 10 priciest building sales of the year included nine office buildings — a threefold increase over the three office towers that cracked the top 10 list in 2012.
Those sales were driven in part by the recovery of the Manhattan office leasing market, which rebounded in 2013 after a 2012 drop-off. Last year at this time major office tenants shied away from committing to large blocks of space. A year later, however, the market has stabilized.
The uptick is evident in the latest office market stats.
In the third quarter of 2013, the vacancy rate for Manhattan office space dropped to 11.5 percent, from 12 percent the year earlier, according to data from commercial firm Colliers International. Average asking rents in 2013’s third quarter were $63.55 per square foot, up 12.4 percent from $56.52 year over year, and up 2.3 percent from $62.13 from the second quarter, according to data from Cassidy Turley.
The office recovery, coupled with perceived economic stability following several years of anxiety about the European markets, spurred investors to plow cash into the commercial office sector.
Five building sales topped $1 billion in 2013, while in 2012 none reached that level.
An increase in activity in the commercial mortgage-backed securities market, has allowed for larger transactions to occur.
The aggregate value of the 10 priciest Manhattan investment sales deals for 2013 was $9.3 billion — up from $4.8 billion in 2012.
The priciest full-building sale of the year was the $1.35 billion sale of an office tower at 650 Madison Avenue to a joint venture comprised of Oxford Properties, Steven Roth’s Vornado Realty Trust, Crown Acquisitions, Highgate Holdings and a group of institutional investors advised by J.P. Morgan Asset Management.
A close second was the $1.3 billion sale of the 1.1 million-square-foot Time Warner Center at Columbus Circle, to the Related Companies. Related, whose chairman is Stephen Ross, bought the complex from Time Warner and then leased it back to the media giant, which is slated to relocate to Related’s under-construction Hudson Yards site in a few years.
Tied for second was the $1.3 billion sale of 30 Rockefeller Plaza to communications giant Comcast. (That deal was part of Comcast’s $16.7 billion purchase of a 49 percent stake in NBC Universal from General Electric.)
The only non-office building to make the 2013 top 10 deals list (in 9th position) was the sale of the Helmsley Park Lane Hotel at 36 Central Park South to the Witkoff Group and its majority backer Jynwel Capital, a Hong Kong–based private equity investor (see “Witkoff: the savvy strategist”). That property sold for $660 million in late November.
Several of Manhattan’s more high-profile investment sales deals in 2013 were not outright building sales. Instead, they were the sales of equity stakes in large office buildings. The rise in stake sales was the result of an uptick in the number of foreign investors active in New York. Foreign companies, rushing to get capital into New York, can avoid taxes by acquiring a non-controlling stake of a property. As outsiders, they may also want to partner with an experienced local player in order to maximize their return on investment.