Commercial property yield in New York (Manhattan) is driven by price point. The lower price point properties, less than $20 million, generally have an asking price at a 5 percent yield.
The higher price point commercial properties, more than $30 million, would have a higher yield , perhaps 8 percent or more. Reason is that at a higher price point, there are fewer players which decreases demand. Also, buyers at the higher price point are often institutions that put a lot more pressure on sellers from a pricing perspective.
The value of commercial property is driven by yield. Similar to a stock's PE ratio. The more the landlord can obtain in rent, the higher the value because a set multiple, in this case rental yield, would be applied.
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Wei Min Tan is a real estate broker and investor focused on investment property in Manhattan, New York. He can be reached at tan@castle-avenue.com
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