The RPG Office Condominium Report
First Half 2018 Office Condominium Sales
- A Strong First Half: The first half of 2018 was a near record year in terms of total square footage sold and the total dollar value of sales. There were 250,000 square feet of office condominiums sold in the first half of the year, totaling $237 million in sales.
- Record Pricing: In the first half of 2018, the average price per square foot was a record high of $934. The average price per square foot was 23% higher than the five-year average of $758.
- Rise of the Owner-Occupier: Office condominiums have historically been known to attract non-profits, small businesses and doctors. Recently, there have been a wave of major corporate users who have purchased their office space, including Google's $2.4 billion purchase of Chelsea Market, WeWork's $850 million purchase of the Lord & Taylor building, and Time Warner's, Wells Fargo's and KKR's purchase of office condominiums at 30 Hudson Yards.
Market Overview
The Manhattan office condominium market is made up of 99 buildings, occupying a total of 10.9 million square feet. The Midtown submarket is comprised of 6 million square feet; Midtown South is comprised of 2.8 million square feet; Downtown is comprised of 2.1 million square feet.
There are 3.4 million square feet of class A office condominiums, 5.4 million square feet of class B, and 2.1 million square feet of class C.
In the first half of 2018, there were a total of 253,174 square feet of office condominium sales in Manhattan, totaling $236,501,223. The sales averaged $934 per square foot. There were a total of 34 office condominium units sold in 20 different buildings, averaging 7,446 square feet per sale.
The total square footage of sales nearly doubled in the first half of 2018, compared to the second half of 2017, with 253,174 square feet sold in the first half of 2018 and 128,001 square feet in the second half of 2017. The total square footage of sales in the first half of 2018 is also notably higher than the five-year average of 209,514 square feet per half year.
In the first half of 2018, there was a total of $236,501,223, which is more than double the dollar of sales in the second half of 2017. The dollar value of sales is 50% greater than the five-year average of $158,724,237.
In the first half of 2018, the average price per square foot was a record high of $934. Pricing was significantly higher than the previous record of $875 per square foot recorded in the second half of 2016. Pricing was also significantly higher than the five-year average price per square foot of $758.
There were 34 sales in the first half of 2018, compared to 22 sales in the second half of 2017. The number of office condominiums sold in the first half of 2018 was higher than the five-year average by 4 sales.
The Midtown submarket is Manhattan's largest office condominium submarket, comprising of approximately 6 million square feet. In the first half of 2018, there were 24 sales totaling 182,823 square feet. The dollar value of these sales totaled $175,481,775, averaging $960 per square foot.
The Midtown South submarket comprises approximately 2.8 million square feet of office condominiums. In the first half of 2018, there were 3 sales totaling 14,759 square feet. The dollar value of these sales totaled $12,735,560, averaging $863 per square foot.
The Downtown submarket comprises approximately 2.1 million square feet of office condominiums. In the first half of 2018, there were 7 sales totaling 55,592 square feet. The dollar value of these sales totaled $48,283,888, averaging $869 per square foot.
There is currently 813,668 square feet of available Manhattan office condominiums, which equates to a 7.4% availability rate. There are 74 units for sale in 36 buildings, with an average asking price of $1,052 per square foot. In the Midtown submarket there is 587,357 square feet for sale with an average asking price of $1,093 per square foot. In the Midtown South submarket there is 49,105 square feet for sale with an average asking price of $962 per square foot. In the Downtown submarket there is 177,206 square feet for sale with an average asking price of $943 per square foot. The availability rate has increased by 0.8% from the second half of 2017.
In the first half of 2018, there were 252,908 square feet of office condominium sales in Manhattan totaling $238,363,883. There were 37 office condominium sales, averaging 6,835 square feet per sale, at an average of $942 per square foot.
Market Overview (continued)
Square Footage of Sales: The 252,908 square feet sold in the first half of 2018 is 98% higher than the 128,001 square feet sold in the second half of 2017 and 2% higher than the five-year average of 247,427 square feet sold. Out of the 37 sales, the smallest sale was 351 square feet and the largest sale was 36,006 square feet.
Dollar Value of Sales: In the first half of 2018, office condominium sales totaled $238,363,883 which is 127% more than the $104,988,477 in sales for the second half of 2017. The dollar value of sales is 30% more than the five-year average of $183,326,522.
Average Price Per Square Foot: In the first half of 2018, the average price per square foot was $942. This is 15% higher than the second half of 2017 average of $820 per square foot and 27% higher than the five-year average of $741 per square foot.
Number of Sales: There were 37 sales in the first half of 2018, up 15 sales from the second half of 2017. The number of office condominiums sold in the first half of 2018 was 5 more than the five-year average of 32 sales.
Submarket Statistics
The Midtown submarket: In the first half of 2018, there were 19 sales totaling 153,297 square feet. The dollar value of these sales totaled $148,527,764, averaging $969 per square foot.
The Midtown South submarket: In the first half of 2018, there were 13 sales totaling 91,661 square feet. The dollar value of these sales totaled $82,019,690, averaging $895 per square foot.
The Downtown submarket: In the first half of 2018, there were 4 sales totaling 6,651 square feet. The dollar value of these sales totaled $6,588,888, averaging $991 per square foot.
Notable Office Condominium Sales
The Rise of the Owner-Occupier
By Rudder Property Group
In the first half of 2018, 93% of buyers who purchased New York office condominiums were owner-occupiers, as opposed to investors.
The difference: owner-occupiers purchase office condominiums to use for their operating space, while investors purchase them to lease out to tenants and earn a rate of return on their investment.
The cost-saving benefits of condominium ownership are significant. Owner-occupiers will find it often costs less than leasing, especially as New York City rental rates remain at record highs. A variety of financing options make office ownership affordable for businesses, while many non-profit and government organizations are exempt from paying real estate taxes when they own and occupy their office space. Businesses can justify higher build-out costs to increase their competitive edge and value of their real estate while insulating themselves from the escalating and unpredictable costs of leasing. No longer are they subject to the whims of landlords or fluctuations of the market.
While the majority of office condominium owner-occupiers tend to have smaller footprints, larger corporations are beginning to realize these benefits and are purchasing their space for the same reasons: control over their space, long-term capital appreciation, and they are no longer willing to throw money away in rent.
Recent Headline-Grabbing Purchases
The major corporate users who look to reap the benefits of office ownership have been actively purchasing both office condominiums and entire buildings over the past few years. Among them:
- Google's $2.4 billion purchase of the 1.2 million-square-foot Chelsea Market from Jamestown. The internet giant had already occupied a significant portion of the building, and the purchase follows its $1.7 billion buy of 111 Eighth Avenue from Taconic Investment Partners in 2010.
- JPMorgan Chase's purchase of air rights from Grand Central Terminal and St. Bartholomew's Church has allowed them to pursue a new 2.5 million-square-foot headquarters building at 270 Park Avenue. The purchase will save the company money by consolidating a variety of locations into one fully LEED-certified, energy efficient office tower.
- WeWork's $850 million purchase of Lord & Taylor's flagship store at 424 Fifth Avenue. After the 2018 holiday season, the co-working company will convert the building into its headquarters.
- The New School's $135 million purchase of the 180,000 square-foot 34-42 West 14th Street from Samson Associates. It plans to turn the property into an academic building once the leases of the building's commercial tenants expire.
- Major corporate users have been purchasing large office condominiums, including Time Warner's purchase of 1.6 million square feet, Wells Fargo's purchase of 500,000 square feet, and KKR & Co.'s purchase of 343,000 square feet at Related Companies and Oxford Properties Group's 30 Hudson Yards.
Rudder Property Group
Rudder Property Group is a commercial real estate services firm that specializes exclusively in the sale of office condominiums in the New York metropolitan area. With 20 years of experience in this niche market, Rudder Property Group has sold over two million square feet of office condominiums with a dollar value in excess of $1 billion. In the small, highly specialized field of office condominium sales, Rudder Property Group is the market leader.
©2018 Rudder Property Group. All rights reserved. All material presented herein is intended for informational purposes only. While this information is believed to be accurate, it is represented subject to errors, omissions, changes or withdrawal without notice. All square footages are approximate and based on rentable square footages with standard Manhattan loss factors. For the purposes of this report, the definition of an office condominium is a building with more than two unit owners that has been constructed or converted to a condominium or cooperative for commercial use only. This report only includes properties in Manhattan below 96th Street.
