For the first time in at least months and possibly years, a week passed with no mid-market investment sales in New York City.
There was little doubt about why: Brokers unanimously blamed the coronavirus pandemic for the absence of buying and selling. And while some said they expected to see at least a few mid-market deals in the weeks ahead, others warned that zero could be the new normal for the time being.
“I don’t think anybody is looking to acquire any real estate until the world opens up again a little bit,” said Walker & Dunlop’s Aaron Appel. “This is a tremendously distressed situation.”
Stephen Preuss of Cushman & Wakefield echoed that, saying he expected zero deals per week to be more of a trend moving forward. Although he has not seen that many people drop out of deals completely, he has seen virtually all of them slow down as buyers and sellers look to get a better handle on the pandemic.
“No matter who it is on the transaction, everyone is pushing for a little bit more time,” Preuss said.
Mid-market investment sales in New York were not exactly on fire prior to last week. Since the beginning of 2020, the $10 million to $30 million segment of the market never saw more than five deals in one week —a peak reached once in mid-February and once in mid-March — and in some weeks only one deal happened.
Paul Massey of B6 Real Estate Advisors attributed the pre-pandemic slowdown largely to the strict rent law New York passed in June. He said the city was on track for only about 1,900 deals in 2020 as opposed to the roughly 2,700 it sees in a normal year.
He expected to see deal volume tick up at least slightly but said buyers and sellers still need more time to get acclimated to the dramatically new environment.
“I think we’re still dealing with system shock,” Massey said. “People need to get over the system shock before they start really transacting.”
David Schechtman of Meridian Capital said the fates of his deals during the pandemic have run the gamut: some are in hard contract and still expected to close, while others have fallen apart. He still expects to see transactions more frequently as pent-up demand is released.
“I think you’re going to continue to see deals close right through this, and volume is going to pick up tremendously deep into the summer,” he said. “You’re going to see an August that feels a hell of a lot more like March or April.”
Uncertainty has emerged as one of the key aspects of the pandemic, as the real estate community is grappling with an unprecedented situation. Eric Anton of Marcus & Millichap said he is advising all of his clients to move forward at a slow and steady pace given how much about the pandemic they still don’t know.
“It shocks me a little bit — but not too much — that everything shut down,” Anton said, “because, look, we’ve never had this before.”