Manhattan Recovers Status As Top Commercial Property Market For Overseas Investors

USA – Despite the issues plaguing the office sector, Manhattan reclaimed its status as the country’s top commercial property market for foreign investors, reported the Commercial Observer on Tuesday (1 November, SGT).

According to MSCI’s latest report, Manhattan was once again the leader in commercial real estate (CRE) activity for overseas investors, recording a 279 percent surge in deal activity in H1 2022 versus the prior 12-month period.

Last year, Manhattan fell to the 3rd spot as investors faced concerns regarding the outlook of office assets amid rising vacancy rates and the popularity of working from home (WFH).

While those uncertainties persist, several international investors, largely from Asia and Europe, have acquired commercial properties in New York this year, with Manhattan cross-border CRE volume hitting US$1.14 billion during the first half of the year. In comparison, the overall tally last year reached US$3.78 billion, with a large uptick in H2 2021 as the authorities withdrew pandemic curbs and reopened the economy.

“It’s not what it was in 2015, when people were paying the top price for something, but cross-border buyers came back in Manhattan more so than other markets,” noted MSCI’s Senior Vice President Jim Costello.

“Manhattan, despite some challenges and questions about the return to office and what happens next, is still a market where you have bigger deals on offer,” he added.

Costello revealed that most of the global investor activity in Manhattan this year involved multifamily properties, but there were still some major office deals. These included Australia’s Macquarie Asset Management acquisition of 375 West Broadway, a Class B office building in SoHo.

Based on data from security firm Kastle Systems, the office occupancy level in New York City on a given weekday stands at almost 50 percent since 4 September 2022. Although that’s a significant uptick from the summer, it’s still below the upper 70 percent range pre-pandemic.

Nonetheless, the current office occupancy rate in New York surpasses that of San Francisco, but still lags behind Sun Belt markets such as Austin, Texas, which has an office occupancy of about 66 percent, thanks in part to more options to drive to work during the pandemic.

“If you drive to your office and you’re not commuting tightly with someone on a subway, you tend to have a little bit better occupancy performance,” added Cushman & Wakefield’s Executive Managing Director Janice Stanton.