>> Manhattan office-property sales sank in 2008
Just 47 buildings were sold, down sharply from the 128 deals in 2007.

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The sales volume of Manhattan office properties plunged 69% last year to the lowest level since 2005, and nearly 60% of activity stemmed from owners forced to sell properties, according to a report released Wednesday by CB Richard Ellis Inc.

The brokerage company said that sales volume hit $12.1 billion last year, down from $38.6 billion in 2007. Forty-seven buildings were sold, a 63% decline from the 128 trades in 2007.

The weakening economy combined with a lack of financing quashed sales activity and the environment worsened as the year progressed. CB Richard Ellis said only 6% of last year’s volume happened in the fourth quarter, down from 20% to 30% in other years.

CB Richard executives said there are signs the credit market is improving but didn’t expect any major loosening until the end of the year or early 2010.

“Finding new financing will be a real challenge,” said William Shanahan, a company vice chairman.

Indeed, 62% of the deals that closed last year involved either the seller providing financing or the buyer taking over the existing debt. Those avenues make closing a transaction easier.

Nearly all of the distressed sales involved properties formerly owned by Harry Macklowe. In 2007, Mr. Macklowe paid $7 billion for 7 office towers but he was forced to return them to his Deutsche Bank-led lenders last year when he couldn’t repay his loans. Deutsche Bank was able to sell five of the buildings, in part because it provided the financing. Mr. Macklowe was also forced to sell four other buildings, including the General Motors building, to pay back debt.

The price of buildings has fallen since the heady days of 2007. According to the report, Mr. Macklowe paid an average of $1,100 a square foot for the seven buildings. The average distressed sale brought in $945 a square foot and only $778 a square foot if the General Motors building is excluded. Properties that weren’t under duress fetched an average of $654 a square foot.