Inflation and Interest Rates Among Strongest Factors of Stalled Investment Sales Activity

Multiple factors have contributed to a slow start of 2024 investment sales activity, such as persistent remote work causing many office buildings to drop in value, “creating a situation where most office deals would not be financially feasible;” an increased volume of struggling owners undergoing the lengthy process for bankruptcy protection instead of sales; and a “general environment of uncertainty with the upcoming presidential election and multiple wars overseas.” Although these have all been contributing factors, the strongest cause of a stalled investment sales market is the persistent high inflation and interest rates. During the 1st quarter of 2024, there was a total dollar volume of about $2.9 billion in sale transaction spread across 392 deals and 442 buildings, representing the second-lowest volume since at least 2015; and about 43% lower in dollar volume year-over-year. The slowdown of investment sales activity will have some impact on the city’s tax revenue due to the lowering of property transfer tax and mortgage recording tax collections, which the Independent Budget Office projects will be roughly $1.8 billion in fiscal year 2024 — a 16% decline year-over-year. Yet despite the slow start to the year, many in the real estate industry are “stressing that fundamentals of the New York and national economy both remain strong; as well as the good health of “financial indicators in the city such as rents, jobs and tourism numbers.”