By Benyamin Davidsons
Commercial property sales in New York City produced more bad news in the second quarter of 2020, due to the novel Coronavirus. As reported by the Wall Street Journal, the volume of commercial property transactions was down, and the downward inclination will likely hasten in the last half of the year.
Between April 1 and the end of June 2020, investors only purchased 170 properties valued at a total of $3.6 billion. That is the least amount of transactions for a three-month period since the second quarter of 2009, as per B6 Real Estate Advisors. By contrast, in the second quarter of 2019, there had been 523 deals valued at $7.6 billion, noted the firm, which specializes in NY commercial property sales.
The manner in which the number of sales nose-dived reveals a much speedier decline than in the last recession, when sales fell gradually quarter-to-quarter, said Adrian Mercado, B6 Real Estate chief information officer. “Here you see a cliff,” Mercado said. “It’s a threat that commercial real estate has never really faced before in this city.”
What’s more is, a big majority of the deals that took place in the second quarter of this year were already set into motion in mid-March. When the coronavirus hit, many of the deals went through notwithstanding, because buyers had already made nonrefundable deposits. In some cases buyers and sellers still renegotiated, lowering prices, real-estate brokers and investors revealed.
Mr. Mercado went on to add that he predicts volume in the last two quarters of 2020 will be even lower than in the second quarter, because very few new transactions even being negotiated these days. “A lot of people are not going to go into the market,” Mr. Mercado said, describing commercial real estate. Even investors who have money, will likely opt to shore up their existing properties, he said. Others “are going to wait to see what happens,” he said.
The WSJ reported that the sharp decline in sales volume will undoubtedly have negative implications for city tax collections. First off it will mark a harsh reduction in collections of NYC’s 2.65% real-estate transfer tax, which brought in $893.3 million for the city in 2019, according to B6 Real Estate. The company is expecting that the transfer tax will only bring in $500.3 million in 2020.
Moreover, the turmoil in commercial real estate could put a major damper on the city’s already ailing budget if it leads to lower assessment values on office buildings, hotels, stores, and other properties, said Paul Massey, founder and chief executive of B6 Real Estate. “The decline in value is the bigger issue for the city to face,” said Mr. Massey, who had run for mayor against de Blasio in 2017. “We could be talking about billions of dollars in unanticipated shortfall.”
