Sunday Summary: The Best Office Market in Years – Commercial Observer
Friday we were hit with employment numbers that were disappointing. The economy added only 29,000 jobs in September, and the U.S. unemployment rate ticked up to 4.2 percent. Moreover, borrowers need to be at least a little nervous about the fact that the 10-Year Treasury has reached its highest rate in 19 years. (What were we doing 19 years ago? Oh yeah! We were getting ready for the GFC to commence.)
But, before the hand-wringing gets out of control, real estate professionals should consider this: The volume of office space available for lease in Manhattan is at its lowest level since 2020, according to research from Colliers — and it doesn’t look like there’s any end in sight to the shrinkage.
Since July, some 10.06 million square feet of leases have been signed in Manhattan, making the third quarter of this year a good 19.2 percent above the 10-year average (with the caveat that this 10.06 million was still a little lower than the second quarter’s 11.02 million.)
We see the action in leases like Qube, the global investment manager, taking 52,000 square feet at Related Companies and Oxford Properties Group’s 70 Hudson Yards. (That wasn’t Related’s only big office deal last week — Castle Hook Partners is planning to take space at the upcoming 625 Madison Avenue.)
Tenants like Bank of India and the global investment firm IQ-EQ Fund Services signed leases at Stawski Partners’ 1212 Avenue of the Americas. Up the block, Morgan, Lewis & Bockius took 205,000 square feet at Mitsui Fudosan America’s 1251 Avenue of the Americas. Up another couple of blocks, Silvercrest Asset Management and i80 Group, two investment firms, each took space at Fisher Brothers’ 1345 Avenue of the Americas.
And it’s hardly just that hallowed strip of Sixth Avenue that interests tenants. Private equity firm Sentinel Capital Partners added an additional 7,134 square feet at its office at SL Green Realty’s One Vanderbilt, bringing its total footprint up to 34,737 square feet.
Oh, and while it might not be a done deal, we heard that Sony is in negotiations to become the anchor tenant at Tishman Speyer’s 99 Hudson Boulevard. (No word yet on how much space we’re talking about.)
All of which should give the worrywarts a little perspective. Yes, there are a lot of problems out there. Developers are having to be more nimble than ever with their plans. Housing remains a bit of a black box. (Everyone interested in NYC housing should read our interview with city housing official Dina Levy!) But for the right market and the right asset it’s actually a pretty good time to be a borrower.
Retail, retail, retail!!
Retail isn’t doing badly, either! A bombshell landed last week when Brixmor Property Group and Everview Partners announced they were acquiring the 63 million-square-foot Slate Grocery REIT for $2.34 billion.
The bloodied but unbowed Toys R Us announced plans to open 120 temporary stores around the country before the holidays in partnership with the seasonal operator Go! Retail Group.
And, for those nostalgic Gothamites among us, we learned that Maison Estelle, the Britain-based members-only club, was taking the 30,000-square-foot Church of the Holy Communion at 656 Avenue of the Americas, which housed the Limelight nightclub in the 1980s and `90s.
Of course, the chips are down for some unfortunate businesses, but we’ll take the rest of the above as good news.
When can we get to Florida??
If we’re really talking “no end in sight,” the market that seems to just keep surprising us has to be South Florida.
The development team behind Mercedes-Benz Places–Miami just scored a $1.11 billion financing package for the 67-story, 791-unit luxury condo, led by J.P. Morgan, with Nuveen Green Capital providing $250 million in C-PACE financing. (Remember what we said about how it was a good time to be the right borrower?)
Related Urban Development Group (again with the Related!) secured $167 million in construction financing for the two-tower, 257-unit Gallery at Lummus Parc affordable multifamily project in Miami.
Local legend Craig Robins coaxed Josh Harris (who owns the Washington Commanders and co-founded Apollo Global Management) and Atria Health Research to sign on the line which is dotted at his Sweetbird North mixed-use development in Miami’s Design District.
But the story that really got us excited this week was the $1.1 billion Ken Griffin shelled out to Moishe Mana to buy a 35-acre chunk of Wynwood, making it one of the largest real estate transactions in history. The deal was part of the $2 billion that Griffin is donating to launch a branch of Carnegie Mellon University in Miami.
It certainly gives us a sense that the Miami story is just getting started.
See you next week.
