The Manhattan real-estate market can be as predictable as the changing of the years.
Historical trends grip the various markets—hotel, housing, office, investment sales—and hold tight year in and year out, with little variation unless a major event or catastrophe wallops what, for the most part, remains an island apart from the rest of the U.S.
In fact, the conventional wisdom declares Manhattan comparable in its real estate to world cities like Paris and Tokyo, and not to brethren Americana like Chicago or Boston.
The conventional wisdom, for once, is spot-on.
So we’re going to go way out on a limb, this first week of January, and fast-forward 12 months to gaze back at the 2007 Manhattan real-estate market.
Housing, we see, stayed strong, with the average sales price for a Manhattan apartment remaining the entire year above $1 million, a perch it reached in 2004. Sales, too, stayed brisk, with, as usual, the spring and the fall the busiest and the summer traditionally slow, as those who can afford Manhattan housing—especially the higher end—are out of the city, where it’s cooler.
The effects in 2007 of the record $23.9 billion Wall Street bonus season remained debatable, but brokers did report strong sales activity. Still, 2007 did not trump any recent annual sales record; 2002 still holds that, at 9,509 sales. There were 8,493 in 2006, according to the appraisal firm Miller Samuel.
Toni Haber, a top broker with Prudential Douglas Elliman, said in December that her team had more than half of what they closed in 2006 ready to close in January through March of 2007.
“We’re an entity unto ourselves,” Ms. Haber said of Manhattan, “and I think people want to own a piece of real estate in New York City.”
Those who can’t (most of Manhattan), rent.
The rental market, we find, was busiest in 2007 in the spring and the fall, due to new college graduates and new college students, respectively. The rental activity, spurred in 2007 as in 2006 partly by the slowing sales market, kept the Manhattan vacancy rate below 4 percent, where it started the year, according to brokerage Marcus & Millichap.
Rents, meanwhile, continued to rise, hitting an average of $2,719 a month, according to projections, up 6.5 percent from 2006. Rent-stabilized tenants also dealt with increases, of between 4.25 percent and 7.25 percent of their 2006 rents.
Now let’s look beyond the housing market to the Manhattan commercial market in 2007.
The investment-sales market was strong, yes, but perhaps not as strong as in 2006. That was the year everyone learned to pronounce “Istithmar” without pausing, as the Dubai-based firm typified the brand-name appeal that Manhattan increasingly holds for investors—more so than any other American city.
Record investments like the $5.4 billion buy of Stuyvesant Town and Cooper Village and the $1.8 billion purchase of 666 Fifth Avenue spirited the 2006 investment-sales market toward a record year—$30.6 billion worth of property had traded hands by October in Manhattan, more than in all of 2005, according to the brokerage Cushman & Wakefield.
“There’s still a ton of equity out there,” Adelaide Polsinelli, who brokers building sales for Besen & Associates, said in late December. “There’s more equity for real estate than ever before. I don’t see that ending.”
Nor did we in 2006 see the Manhattan office market ending its healthy run. By the end of that year, the office vacancy rate was under 7 percent, according to Cushman & Wakefield, and the average asking rent was $49.60 a foot, including sublease and direct space. This low vacancy and higher rent was mostly due to a strong local economy.
So it was little surprise that 2007 continued the historical trend of a strong economy leading to a healthy job market, which, in turn, leads to a healthy office market.
The only losers in 2007 were companies searching for large blocks of prime space, ones of at least 100,000 square feet. Those were scarcer in 2007, just as they’d become in 2006. Only one top-shelf office tower opened in Manhattan in 2007—the new New York Times Building.
Also opening in 2007 was the retail component of the Plaza Hotel. The coveted space in the iconic hotel turned partly condo only added to the rents that retailers throughout Manhattan have to pay. The average asking rent for all retail space was $106 a foot by the fall of 2006, according to the Real Estate Board of New York.
But for swankier digs like the Plaza, the rent could be much, much higher. The rent for ground-floor space along Fifth Avenue in midtown was $1,035 a foot in late 2006, according to REBNY, and such high retail costs remained in 2007.
Finally, one word: hotels.
The hotel industry in Manhattan in 2007 repeated the success of 2006, buoyed by strong tourism (the city estimated that 44 million people visited New York in 2006) and, again, a strong local economy. The average occupancy rate was nearly 90 percent by the end of 2006, according to PKF Consulting.
In 2007, room rates cleared the previous year’s record of more than $260 a night, on average, and occupancy rates stayed firmly above 80 percent.
We know, after all, that people want in on Brand Manhattan.