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Tuesday, August 18, 2009

Manhattan Office Buildings: Cap Rates More than Double

by Calculated Risk on 8/18/2009 12:06:00 PM

Here is an excerpt on cap rates in Manhattan ...

From Bloomberg: Manhattan Office Sales Ground to Halt in First Half

The scarcity of property sales has made it hard to calculate prices and yields, [CB Richard Ellis] said.

The so-called capitalization rate, or a property’s net operating income divided by purchase price, may have risen to about 7 percent for stable, prime Manhattan office buildings, CB Richard Ellis said.

During the peak, cap rates in Manhattan got as low as about 3 percent.
The increase in cap rates suggests more than half off the peak prices of a few years ago - and probably even more since rents have fallen too (reducing operating income) and vacancy rates are rising sharply (pressuring rents more).

No wonder "buyers and sellers are far apart on bids"!