What a Boffo ’07! But Was It Commercial Market Peak?

Ten building deals over $1 billion, midtown office rents slumbering above $100 a square foot and total investment sales of at least $51 billion closed or in contract by December: Without question, Manhattan’s commercial real estate market, already rallying for years, soared to a high point in 2007.

The question for the New Year, of course, is whether there is any higher to climb; or, in a seemingly more likely scenario, whether we are making our way down the mountain.

After all, given the record-shattering numbers seen in the past 12 months and a less-than-stellar economic forecast in the near term, it’s hard to imagine that the coming year could offer anything to top 2007, at least with respect to investment sales.

We’ll have to wait for the final 2007 tally on Manhattan investment sales, but as of Nov. 30, the year saw a staggering $43.7 billion in closed deals of at least $10 million, more than double the $20.4 billion seen at the same point a year earlier, according to figures provided by Cushman & Wakefield. Add to that just two deals that closed in December, 388-390 Greenwich Street and 1177 Avenue of the Americas, and the number rises past $46 billion.

Such figures are by all means historic. The previous annual record of $34.7 billion was set in 2006, which smashed the previous mark of $20.9 billion, set in 2005, according to Cushman & Wakefield.

In 2007, sellers included banks that sought to cash in on office space that grew valuable under their feet and behemoth financial firms like Blackstone Group, which unloaded part of its new Equity Office Properties Trust portfolio in February to Harry Macklowe for $7 billion.

There were faces old and new: Paramount Group’s Albert Behler agreed to pay Deutsche Bank $1.7 billion to buy both 60 Wall Street and 31 West 52nd Street; Broadway Partners took 280 Park Avenue for $1.2 billion; Monday Properties and Goldman Sachs paid $1.15 billion for 230 Park Avenue; Larry Silverstein and CalSTRS pension fund paid Paramount Group $1 billion for its 1177 Avenue of the Americas; and Marc Holliday’s SL Green forked out $1.575 billion for Citigroup’s 388-390 Greenwich Street, to name a few.

Such a long list of billion-dollar sales seems unlikely in 2008, if the climate remains the same as it has been since the late summer. Credit has tightened substantially, and with loans harder to come by, the market’s once deafening roar has fallen to more of an uncertain hum.

The long-term outlook for the city’s commercial market is still a good one, with government officials and the private sector projecting job growth and increased demand for office space. What that means for the next year or two is hard to say, but at least given the past few months as a template, it seems like the record sales of 2007 might hold their own for some time to come.

What a Boffo ’07! But Was It Commercial Market Peak?