New York City recorded over $28 billion in investment sales in 2024, marking a 26% increase from 2023 and outpacing the national market. Office, development and multifamily asset classes led the way, comprising 70% of the total investment sales volume, Ariel Property Advisors’ research shows.
Office Market Rebounds With $5.4 Billion In Sales
The New York City office market saw a 63% surge in sales to $5.4 billion. Of the City’s total office sales, $5.1 billion were in Manhattan spread across five Class A and 50 Class B and C office buildings.
Manhattan’s Class A office towers performed exceptionally well last year with high-end corporations such as hedge funds, financial institutions and law firms not only returning to the office but seeking to lease space in highly amenitized buildings where they can create a club-like corporate culture for their employees. In fact, Class A office buildings are so desirable that 8 million square feet of new office space is being built in the City by JP Morgan, Rolex and Citadel for their own use and by Vornado, Moinian and Brookfield for tenants.
Investors and lenders also stepped up to take a piece of the Class A market as illustrated by SL Green’s sale of 11% of One Vanderbilt to Japan’s Mori Building Company for $4.7 billion, or $2,800/SF, and Rockefeller Center’s $3.5 billion refinancing with Bank of America and Wells Fargo.
Class B and C buildings weren’t as fortunate, however. Vacancies and financial challenges contributed to 14 buildings being sold at discounts ranging from 11% to 73%. Opportunistic investors took advantage of the low basis and picked up these assets for repositioning.
NYC Development Sales Hit $5.5 Billion in 2024, Fueled By Conversions
Development sales in New York City rose 53% year-over-year to $5.5 billion, largely due to office-to-residential conversions. The activity included the sale of $2.4 billion of Class B and C office buildings totaling about 7 million square feet that is expected to be transformed into apartments either through conversions or demolitions.
Ariel Property Advisors’ research team identified 19 office buildings sold last year that are slated for residential development. Significantly, Related purchased 625 Madison Avenue and Extell acquired 635 Madison Avenue with both planning to tear down and redevelop the sites for residential, retail and hospitality use. Meanwhile, Legion acquired 8-12 West 14th Street with plans to replace the existing office building with a new condo development.
Office-to-residential conversions got a boost last year from New York State’s new Housing Policy, which introduced the 467-m tax exemption that will allow tax savings of 90% for conversion projects in Manhattan below 96th Street and tax savings of 65% in the rest of the city. In exchange, 25% of the units must be rented at a weighted average of 80% of AMI. In addition, the City of Yes, a pro-housing zoning proposal approved last December by the New York City Council, will make it easier to convert buildings constructed before 1991 in most areas of the city.
The state’s Housing Policy replaced the 421a tax abatement, which expired in June 2022, with the 485x tax incentive, but extended the deadline for completing vested 421a projects from 2026 to 2031. This extension contributed to 25 development site sales in 2024, including the former Pathmark site at 142-96 East 125th Street.
Based on the 337 development transactions across New York City last year, our research team estimated that approximately 177 ground-up residential development sites totaling over 9 million square feet could benefit from the 485x tax abatement, not including the Universal Affordability Preference bonuses in the City of Yes. The City of Yes complements the 485x program by allowing for increased density and reduced parking requirements among other benefits.
More details about the Housing Plan and City of Yes are available in a previous Forbes article I published in December 2024.
Multifamily Sales Grow 14%, Driven By Strong Demand For Free Market Units
New York City’s multifamily sector increased by 14% year-over-year to $8.9 billion in sales across 1,107 transactions in 2024, Ariel’s multifamily research shows.
This asset class is divided into three categories—free market, which is barely regulated and accounted for 63% of the multifamily dollar volume; rent stabilized, which is highly regulated and accounted for 29% of last year’s volume; and affordable housing, which is regulated but aligns public and private interests and accounted for 8% of the dollar volume.
Strong Fundamentals Draw Diverse Investors To Free Market Multifamily
Every type of investor, including institutional, international and private buyers, was attracted to free market multifamily last year because the fundamentals for these assets are strong. Prices have fallen by an average of 28% while free market rents in prime areas have risen by 20% in the last three years.
Nine free market multifamily properties sold for more than $100 million last year and institutional investors such as Silverstein, Carlyle, JW Capital, Island Capital, Stonehenge, Stockbridge and Fetner acquired free market multifamily assets in Brooklyn and Manhattan.
Private Investors And Family Offices Target Rent-Stabilized Housing As Prices Plummet
Rent-stabilized assets faced pricing declines of 29% to 68% compared to their last sale between 2010 and 2019, attracting private investors and family offices. Some buyers bet on potential regulatory changes to the Housing Stability and Tenant Protection Act of 2019, while others focused on converting units to affordable housing and leasing to voucher tenants.
Public-Private Partnerships Drive Major Affordable Housing Deals In 2024
The affordable housing sector remained active last year, with major transactions driven by public-private partnerships. Significant affordable housing sales included Knickerbocker Village, 80 Greene Avenue & Tri-Block Houses, and Beacon Mews and 226 & 259 West 144th Street, which was sold by Ariel Property Advisors for nearly $50 million.
2025 Outlook: Increased Transaction Volume And Pricing Recovery On The Horizon
Looking ahead, New York City’s commercial real estate market is poised for increased transaction volume and potential pricing stabilization. Key trends include:
- Mortgage Maturities: With $1 trillion in loans maturing, refinancing challenges could create buying opportunities.
- Housing Policy Impact: The City of Yes and new state tax incentives will drive development.
- Capital Markets Shift: Private equity and international investors will step in where traditional lenders pull back.
- Interest Rates: The direction of mortgage rates remains uncertain but will heavily impact valuations.
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Content for this article was taken from Ariel Property Advisors’ 2024 Year-end Research Reports, which I presented at our firm’s Coffee & Cap Rates event on Feb. 6, 2025. To view the full presentation, please click here. To access Ariel’s research reports, please click here.
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