NYC Feels Heat from Credit Crisis, But Long-Term Outlook Still Favorable
Commercial Property News reports: New York City’s commercial real estate market isn’t immune to the fallout caused by the economic downturn. Transactions have plummeted 61 percent from the beginning of the year through October, according to data from Real Capital Analytics Inc. In the longer term, however, the outlook for the market remains strong.
The credit crunch has been “very democratic” in terms of its impact on the commercial real estate landscape, touching all markets, investors and property types, according to Dan Fasulo, managing director & head of research for Real Capital Analytics. “The more that net operating income decreases for properties, the more pressure that investors are going to be under to either dispose of assets or to give the keys back to the bank,” he said.
There were some major sales deals in New York City that took place in the third quarter, perhaps most notably Lyold Goldman’s grab of 1372 Broadway from Wachovia Corp. and SL Green Realty Corp. for $274 million--61 percent less than what the joint venture shelled out for the property in July 2007. On average, the size of transactions taking place in New York City is markedly lower than that of the megadeals that that market has grown accustomed to. “Of the small amount of deals that are actually happening right now, a majority of those have been smaller transactions: $2 million to $20 million,” Fasulo said. “It’s very difficult to get financing for any type of significant deal right now. Lenders aren’t willing yet to go out on that limb and loan into this environment and to make bets of that scale, given the perceived risk.”
On a national level, going into September, $20 billion in office, industrial, retail and apartment sales were in contract, but less than $10 billion transactions closed, according to Real Capital Analytics. For sales volume to rejuvenate, the debt markets must return to some semblance of normalcy and investors must feel confident that there is a light at the end of the tunnel regarding the lagging economy.
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Posted by: Nina Turner