New York is having such a slow year in commercial property sales that it has fallen behind Los Angeles and Dallas in deal volume, according to a new report by Real Capital Analytics Inc.
Investors purchased only $14.1 billion worth of commercial property in the first three quarters of this year in Manhattan, a decline of 56% from the same period last year. In Dallas the volume was $15.1 billion, an increase of 11%, while Los Angeles’ volume was $21.2 billion, up 6%, Real Capital said.
The trend is unusual because Manhattan “is the perennial top market in these rankings,” Real Capital said.
Real Capital said New York volume was being crimped partly because of the high number of deals—priced at a total of $5.1 billion—that are under contract but haven’t closed. “There is a chance of Manhattan pulling ahead of Dallas by year-end,” the report says.
In Dallas, the activity is being driven partly by sales of rental apartment buildings, Real Capital said. In Los Angeles, “megadeals” accounted for 33% of all activity this year compared with 20% last year, the firm said.
Commercial property sales nationwide were $114.2 billion in the first nine months of 2017, down 9% from the same period last year. The drop in the third quarter of this year marked the fourth consecutive quarter of declining year-over-year activity, the firm said.
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Real-estate industry participants in New York say the deal slowdown is partly the result of the high levels that values have reached after a lengthy bull market. Buyers are becoming reluctant to pay high prices because they are concerned this cycle is getting stale and rents don’t seem to be rising much.
Meanwhile most sellers are resisting price cuts.
“A lot of sellers don’t have to come off their numbers,” said Dennis Russo, chairman of the real estate group at law firm BakerHostetler. “So they’re refinancing.”
Industry executives say neither side is showing signs of blinking.
“It may stay stagnant for a little bit of time until something cracks,” Mr. Russo said.
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