Investment Sales Up 38% As NYC Developers Gear Up For Action

A storm of development activity is predicted to be coming this year, and small investors are taking the lead. 

The Midtown South rezoning is expected to result in a surge in development activity

In the first quarter, 164 New York City properties traded hands, a 9% uptick from the fourth quarter and a 38% increase year-over-year, according to Avison Young data first provided to Bisnow. The growth is notable, as typically more deals are done in the fourth quarter than the first as companies aim to wrap up the year.

However, those trades totaled $3.7B, a 23% decrease in dollar amount from the fourth quarter, signaling that institutional players are still holding back from doing big deals, especially as the yield on 10-year Treasury notes soared in December and January and have remained elevated.

“Once rates started going up, a lot of buyers, sellers ended up on the sidelines,” Avison Young Head of U.S. Investment Sales James Nelson said. “The fact that trades are happening, that’s good. As long as there’s a willingness to transact, I think we’ll certainly see more of the larger transactions.”

Roughly 26% of the dollars changing hands was spent on development sites, more than any other asset class during the quarter and the highest share of the market since 2018. Price per buildable square foot was also up 10% year-over-year, according to Avison Young.

Among the priciest deals to close in 2025 so far were Uniqlo’s $355M purchase of a 666 Fifth Ave. retail condo from Vornado Realty Trust and Extell Development’s $175M purchase of the final piece of an assemblage at 576 Fifth Ave.

The first quarter’s dollar volume was up 24% from last year’s Q1, when Kering’s $963M purchase of 715-717 Fifth Ave. accounted for nearly half of all money spent in Manhattan during the period.

The sales kick off what could be a monumental year for New York City development.

While the 485-x and 467-m tax incentive programs were passed last year, full rules and applications haven’t been made available until this year. Developers are additionally sorting through the impacts of the City of Yes rezonings to determine what may be feasible in the new landscape. 

Plus, several neighborhood rezonings have either already passed or are making their way through the city approval process. That includes the Midtown South rezoning, which would greenlight residential development on 42 blocks around Penn Station, where currently only commercial use is permitted. 

Avison Young Senior Director of U.S. Investment Sales Erik Edeen said the Midtown South rezoning is expected to pass in Q3. The deadline to commence a project applicable for 467-m, the office-to-residential conversion tax break, is the end of June 2026.

“You’re talking about a nine-month period where there’s probably going to be a huge flurry of activity in people figuring out if conversion makes sense,” Edeen said. “And we’ve seen a run-up in conversion already.”

During the first quarter, 15 office buildings or office condos sold in Manhattan, while another three properties traded were already specified to be for conversion purposes. 

More than half of all office buildings sold in 2025 so far are slated for residential conversions, increasing from 35% in 2023 and 44% in 2024, according to another Avison Young report.

Tariffs could slow that development activity, though. Fears over construction costs and greater market uncertainty have arisen since “Liberation Day” last week. But whipsawing changes in implementation, when President Donald Trump announced, paused and readjusted policy several times last month, make it difficult to calculate what the long-term impact may be. 

“It’s going to take some time for developers to process what that’s going to do to hard costs,” Nelson said. “But if there is pressure on development, the pendulum swings back. What that does is make the existing more valuable.”