Where is the priciest shopping in midtown Manhattan? To judge by two recent deals, you are more likely to find a bargain at Harry Winston or Bergdorf’s than in commercial real estate. And this surely pleases owners of the Empire State Building, who have just received the go-ahead for an IPO.
On Monday, private equity firm Carlyle Group sold the office building 650 Madison Avenue for $1.3bn to Crown Acquisitions and Highgate Holdings. The price per square foot comes out to a record-setting $2,200. That sale comes on the heels of a foreign group closing a deal for 40 per cent of the General Motors Building for $1.4bn, or $1,700 per sq ft. The two buildings are nearly adjacent, and reside in a part of midtown where leading financial firms and other companies have offices and where tourists stream by in their millions, hitting the stores on their way to nearby Central Park.
The prices are exceeding the peak valuations from before the financial crisis, proving once again that there is no substitute for trophy assets in the world’s best neighbourhoods. The crucial feature of these neighbourhoods is foot traffic from shoppers. At 650 Madison, the new buyers have indicated that a majority of the value comes from the retail space at the base of the building, which represents just 13 per cent of the total square footage.