Manhattan Deal Volume Scarce; Cap Rates In The 7′s

In the first half of the year, there were three sales greater than $30M in Manhattan, representing 10% of what is normally transacted.

The so-called capitalization rate, or a property’s net operating income divided by purchase price, may have risen to about 7 percent for stable, prime Manhattan office buildings, CB Richard Ellis said.

During the peak, cap rates in Manhattan got as low as about 3 percent. Actual cap rates vary by property.

As rents and occupancy continue to deteriorate, we’re going to see the continued incline of capitalization rates. And as far as they go, NYC is about as core of a market you can get; with cap rates there in the 7′s, most other markets which are considered “core” such as San Francisco are historically at least 150-200 basis points higher for an equivalent asset, puting local cap rates for well leased, quality assets in the 8.5-9%+ range.

[via Bloomberg]

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Comments

rb August 20, 2009

commercial real estate problems

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