June 6, 2017
Even as the Federal Reserve hikes interest rates, average yields on investments in commercial real estate have stayed low in New York City. That’s because real estate in New York keeps becoming more desirable.
“Capitalization rates in New York City, even compared to just one year ago, have remained stable as property values have continued to rise,” said Jillian Mariutti, director at Mission Capital Advisors. (Cap rates represent the income from a property as a percentage of the sale price.) The average cap rate for New York City Class-A office properties was 4.3% in 2016, and has held steady at the same rate this year, according to Mariutti.
“the investment demand, especially from foreign investors who are eying top markets such as New York City, has helped counteract the rise in interest rates we saw this past year,” said Mariutti.
Also, potential buyers in New York have lots of choices for financing. “The availability of capital today, in particular in New York City across all asset classes, is one of the key factor’s that’s driving this trend and keeping cap rates tight,” said Mariutti.