By Herbert Lash
NEW YORK (Reuters) - A softer Manhattan real estate market can be seen in office rents, the dollar volume and number of buildings sold, while a large Chinese buying presence so far in 2017 is likely to taper off later this year, brokerage Cushman & Wakefield said on Thursday.
The dollar volume of buildings sold in Manhattan in the first six months of the year is running at half the annualized pace of last year's $39.6 billion in sales, which was off from a record $59.9 billion in 2015, the brokerage said.
Foreign buyers in deals valued at $1 billion or more are on pace to surpass last year's six transactions, with three deals closed year to date and a letter of intent signed on another, Cushman & Wakefield said at a media presentation.
Including a pending bid by sovereign wealth fund China Investment Corp for a 49 percent stake valued at $1 billion in 1515 Broadway, the Chinese accounted for almost two-thirds of the $6.9 billion that foreigners invested in Manhattan properties.
But overall Chinese investment volume is declining and is unlikely to pick up because of a planned meeting of the National Congress of the Communist Party in the autumn, said Doug Harmon, chairman of capital markets at the brokerage.
Chinese investment in Manhattan peaked at $7.91 billion last year. The number of properties bought was about 50 in 2015 and has dropped steadily since then to less than 10 so far this year.
A silver lining can be found in the rising price paid for office buildings, Harmon said. Excluding their retail space, the average price per square foot rose to $1,161 in the first half of the year from $1,134 in 2016 and $1,112 in 2015.
"A lot of trapped capital is going to force deals," he said.
The rent tenants have contracted for Class A office space in Midtown Manhattan slipped to $79.40 a square foot from $81.04 in 2015, the brokerage said.
The net effective rent, which includes rising landlord concessions, has fallen to $63.65 a square foot from $70.38.
Concessions are up due to some 15.2 million square feet of new development that will come on line by 2022, along with the densification of office space.