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In Today's Email

• Market Trends: New York seeing buyers shift strategies in big ways

• Residential: Record housing market lows in San Francisco

• Office: Chicago is back to work, in person

• Hospitality: Phoenix hotels seeing historic numbers during Super Bowl

New York Buyers Haven't Eased Up

In New York, the commercial real estate market has remained quite strong. Despite a slowdown in the second half of the year, investment sales in Manhattan rose 40% in 2022 — reaching almost $21 billion in total volume. 

In terms of distribution, the largest share of that increase in volume went into large multifamily assets, where sales have more than doubled since 2021. Additionally, sales of development sites have also nearly doubled, with investments in commercial properties up 63% year over year. Even with the negativity surrounding the sector, sales in office properties also increased 53% from the previous year in New York.

Surprisingly, the two largest investment sales of 2022 involved office space. With Alphabet (parent company of Google) purchasing 550 Washington Street in Hudson Square for nearly $2 billion and SL Green Realty's purchase of 245 Park Avenue for $1.8 billion. In the multifamily sector, the largest sale was Blackstone's purchase of 8 Spruce Street in the Financial District for $930 million. 

When breaking down the city a bit more, Manhattan's Midtown East area saw the largest share of investment in 2022 — with over $6.4 billion in investment — followed by Downtown West with $4.3 billion.

The Bay Area Not Immune To Market Downturn

As mortgage rates continue to rise and the housing market continues to cool off, it seems that even the most untouchable of markets are starting to break down as well.

According to The San Francisco Chronicle, for the first time since 2012, the average home in San Francisco is selling for less than its asking price. In the San Francisco metro area, specifically, the average sale-to-list percentage was 99.2%, the last time that ratio dipped below 100% was in February of 2012. 

Throughout the pandemic, San Francisco's sale-to-list percentage saw a low of only 101.4% in January of 2021, with a peak of 111.6% in April of 2022. 

Historically, the Bay Area has performed significantly better than the national average — since over the past ten years the nationwide percentage has remained well under 100%, except briefly from March 2021 to July 2022. Yet the Bay Area is now on the forefront of the national housing downturn, with many neighborhoods in San Francisco seeing the biggest declines since June of last year. 

Chicago Has Over Half Its Workers Back In Person

For the first time since companies were forced to switch to remote work models in March of 2020, office occupancy levels in Chicago are now back over 50%. 

According to President & CEO of the Chicago Loop Alliance, Michael Edwards, the return to the office has been "agonizingly slow", with the vast majority of returning workers being on the younger side. 

Although this slow and steady return is promising for office building owners, it appears that retailers reliant on foot traffic driven by office workers have had no break since the start of the pandemic and continue to be severely impacted. To put things in perspective, before the pandemic, the average office occupancy in Chicago was well over 90%, and within the first year of the pandemic, that figure dropped below 20%.

Obviously, office space and occupancy is far from "back to normal", with the new definition of "normal" still to be seen. In Chicago, at least, there seems to be some hope: compared to other major U.S. metros including New York, Los Angeles, Austin, San Jose, and Philadelphia, Chicago's office occupancy rates have come out on top. 

Hospitality Is Booming In Phoenix

Following the Super Bowl this past weekend, the hospitality industry was on fire in Phoenix, Arizona — the extent to which might even come as a surprise.

The demand from the Super Bowl, as well as Phoenix's already busy tourist season and major golf tournament, resulted in the second-highest revenue per available room ever for a Super Bowl weekend at $419, with fairly standard hotels such as the Residence Inn charging $1,000 a night two days before the game. On the more luxurious side of things, four-star hotels were booking for $1,889 a night, while some ultra-chic hotels charged close to $4,000 per night. Just a year ago, the revenue per available room was merely $167 throughout the city on average. 

Of course, the Super Bowl is a one-time thing, and so rates have most likely already begun to fall back down to reality. Yet, interestingly, in warm-weather destinations such as Phoenix, leisure travel has continued to rebound with strength. Specifically, the average daily hotel room rate of $180 last month was up 22% from January 2019, with revenue per available room in Phoenix outpacing 2019 for each of the past 12 months.

Public Market Trends | Real Estate Investment Trusts

Prologis (PLD) | Current Price: $129.29 | Today's Performance: +0.97%

Public Storage (PSA) | Current Price: $302.50 | Today's Performance: +0.87%

Simon Property Group (SPG) | Current Price: $125.78 | Today's Performance: +1.14%

Digital Realty (DLR) | Current Price: $112.97 | Today's Performance: +1.38%

American Tower (AMT) | Current Price: $217.26 | Today's Performance: +0.28%

Crown Castle (CCI) | Current Price: $141.74 | Today's Performance: +0.18%

Equinix (EQIX) | Current Price: $738.87 | Today's Performance: +1.25%

Deal Of The Day

• 195 Henry Street, New York, NY | Asking $2,950,000 | 9,151 Square Feet

• 18 Units (16 one-bedroom apartments & 2 retail units)

• Located in the heart of the Lower East Side of Manhattan

• Near the Brooklyn, Manhattan, and Williamsburg Bridges

• Pro-Forma NOI of $373,231 | Pro-Forma Cap Rate of 12.62%

• Check out more information here

That's All For Today

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