The CMBS-market slowdown is pushing up borrowing costs, making it harder to finance transactions. That is especially true for deals too big for banks and insurance companies to underwrite on their own, according to Costello.

“That type of debt is important for very large transactions,” he said. “Manhattan is an expensive place. Every deal is hundreds of millions of dollars.”

Securitized Debt

The biggest office deal of 2015 was financed in the bond market. SL Green Realty Corp.’s $2.29 billion acquisition of 11 Madison Avenue, the 2.3 million-square-foot (213,700-square-meter) tower overlooking Madison Square Park in the Flatiron district, was funded with about $1 billion of debt. Deutsche Bank AG, Morgan Stanley and Wells Fargo sliced the mortgage into securities and sold the bonds to investors in September, according to data compiled by Bloomberg.

Deals are still getting done, albeit not at the blistering pace of the past two years. Earlier this month, Shorenstein Properties LLC sold a 614,000-square-foot office building at 850 Third Ave. in Midtown to a partnership of MHP Real Estate Services and Chinese conglomerate HNA Group Co.

While returns on property investments are moderating, the U.S. property cycle hasn’t peaked yet, said Jon Gray, head of the real estate group at Blackstone Group LP, the world’s largest private equity property investor and the top buyer of buildings in Manhattan last year.

“We recognize there’s been a moderation in growth and value, but the good news is the real estate investment world is still a very big place,” Gray said Wednesday in an interview at a conference sponsored by New York University’s Schack Institute of Real Estate. “The fundamentals are still pretty good and we’re still managing to find opportunities.”

Haven Sought

A wave of cash from foreign investors seeking a haven has been a powerful force behind the surge in Manhattan property values and isn’t likely to abate, according to Real Capital’s Costello. The relative stability of the U.S. will continue to be a draw even as some of the biggest buyers in recent years struggle with economic uncertainty at home and the repercussions of low oil prices, he said.

Cushman is currently working with 32 Chinese buyers that don’t yet own real estate in Manhattan and are looking for New York property, Knakal said.