February 5, 2016 / 9:20 PM / in 3 years

Canadian love affair with Manhattan real estate seen unabated

MONTREAL (Reuters) - Canadian investment in the Manhattan commercial property market is expected to stay strong this year after quadrupling to hit a record in 2015, real estate specialists said.

People line a dock in Brooklyn to watch the sun set behind the Manhattan skyline after a summer storm in New York in this July 2, 2014 file photo. REUTERS/Lucas Jackson

Canadians accounted for almost a third of the $25.6 billion in foreign capital that poured into Manhattan commercial properties last year, with investment swelling to $8.3 billion from $1.97 billion a year earlier, according to data from Real Capital Analytics.

In comparison, investment from other countries more than doubled during the period, the data showed.

“The trend will continue in New York,” said Ric Clark, chairman of Brookfield Property Group, a real estate division of Toronto-headquartered Brookfield Asset Management.

“We’re in growth mode in Manhattan.”

Brookfield Asset Management is Manhattan’s second-largest landlord, in all asset classes, after the City of New York, according to CoStar Group Inc commercial real estate data compiled by Cushman & Wakefield.

Brookfield has both bought buildings and announced plans to construct new ones. Brookfield Property Partners, a spinoff of Brookfield Asset Management, is now building a 62-storey residential tower as part of its $4.5 billion multi-use Manhattan West development.

Ivanhoe Cambridge, the real estate arm of Quebec’s largest pension fund manager, also ranks within the top 10.

In January 2015, Ivanhoe said it was buying 3 Bryant Park, a Manhattan office property, for a near-record $2.2 billion.

Brian Kriter, a Canadian senior managing director of valuation and advisory for Cushman & Wakefield, said New York City should remain the top market in the world for Canadian property investors such as pension funds. He said the city now has over $15 billion worth of commercial real estate that is available but not officially on the market.

“We also expect to see more mega-deals as Canadian investors are in a flight to quality,” Kriter said.

During the first nine months of 2015, cross-border capital accounted for 29 percent of investment volume in Manhattan, up from 19 percent in 2014, according to data from Cushman and Real Capital.

Rising purchase prices and a weaker Canadian dollar, which fell more than 16 percent against the U.S. dollar in 2015, have not discouraged investors who see the value of steady returns from rising Manhattan rents, Clark said.

For example, between the third quarter of 2013 and the third quarter of 2015, average starting rents for office space have increased over 13 percent in midtown Manhattan to $75 per square foot, Kriter wrote, citing Cushman data.

Editing by Paul Simao and James Dalgleish

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