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Category ArchiveCBRE

Industrious Moving HQ to Union Square From Brooklyn With 14K-SF Deal

Bye bye, Brooklyn!

Flexible office space provider Industrious has signed a 14,484-square-foot lease at SL Green Realty Corp.’s 215 Park Avenue South to relocate its headquarters to the same building where it has its only Manhattan location, Commercial Observer has learned.

The company will move to the entire 13th floor of the 20-story property between East 17th and East 18th Streets, according to a spokeswoman for Industrious. It already leased the entire 17,500-square-foot 11th and 17,255-square-foot 12th floors in the building for roughly 35,000 square feet for shared offices for its members, as CO previously reported. All told, Industrious will occupy more than 49,000 square feet of the 330,000-square-foot property.

The new transaction is for three years and the asking rent was $70 per square foot.

Industrious has been growing rapidly and the company recently landed $80 million in a Series C funding led by Fifth Wall Ventures and Riverwood Capital, as CO reported last month.  

“We’ve had a very busy year and are excited to continue our momentum coming out of our $80 milion funding news a few weeks ago,” Industrious President Justin Stewart said in a prepared statement to CO. “To date, our national team has worked out of the Industrious Brooklyn space, but at the beginning of this year we outgrew our space there.”

The majority of Industrious’ 80 employees will relocate from the headquarters at
594 Dean Street between Carlton and Vanderbilt Avenues in Prospect Heights where it has just under 2,000 square feet for its corporate offices, according to a spokeswoman for the company.

Industrious has 35 locations across the country, and recently reached a milestone with a total of 1 million square feet of space.

CBRE’s Sacha Zarba and Alice Fair handled the deal for the tenant with Katharine Lau, the director of real estate for Industrious, . A spokeswoman for the brokerage did not immediately return a request seeking comment from Zarba. Howard Tenenbaum and Gary Rosen represented SL Green in the transaction in-house.

A spokesman for the landlord did not immediately provide a comment.

Source: commercial

Industrial Investment Firm Abandons Crown Building for New West 57th Street Offices

As the Crown Building at 530 Fifth Avenue gets converted to condominium units and a hotel, its office tenants are jumping ship. The latest example is industrial investment firm Access Industries, which is leaving its fancy digs at the Crown Building for new offices a few doors down.

The company, founded by Len Blavatnik, inked a sublease for 25,000 square feet on the entire 28th floor of LeFrak’s 40 West 57th Street, The New York Post reported. Access is subleasing from corporate restructuring firm AlixPartners, which relocated to 909 Third Avenue in 2015, as Commercial Observer reported at the time. The deal will run through mid-2024, according to the Post. Asking rent was reportedly around $125 a square foot.

The 32-year-old investment outfit will leave the top three floors of the Crown Building, where the proposed five-story penthouse recently entered contract for $180 million, The Real Deal reported earlier this month. The 26-story, Beaux-Arts tower is being revamped into an 83-key hotel managed by the Aman resort chain and 20 luxury condos.

CBRE’s Ben Friedland, Silvio Petriello and Taylor Scheinman represented AlixPartners, and Brian Goldman and Matt Lorberbaum of Newmark Knight Frank handled the deal for Access Industrial. Spokespeople for both brokerages declined to comment on the transaction.

At 40 West 57th Street, LeFrak recently leased office space to Nobu Restaurant Group, Duquesne Fund Services and Tocqueville Asset Management, CO reported this past December. Nobu has also operated a restaurant in the building’s retail space since 2004.

Source: commercial

Wells Fargo Renews Flagship Branch Lease in Midtown East

Wells Fargo has renewed its lease for its long-time flagship location at 437 Madison Avenue, Commercial Observer can first report.

The bank signed a five-year renewal for its 7,206-square-foot space at the William Kaufman Organization building, which spans the blockfront between East 49th and East 50th Streets. The lease includes 4,328 square feet of retail space on the ground floor and 2,878 square feet for offices on the lower level. The asking rent was $500 per square foot for the ground-floor space, a WKO press release indicates.

Wells Fargo has been a tenant in the 40-story, 850,000-square-foot building since 2003.

Michael Lenchner of Sage Realty Corporation, the leasing and management division of WKO, represented the landlord in the deal. In a prepared statement, Lenchner touted the building’s “visibility, high foot traffic and the convenience of being in close proximity to Rockefeller Center and Grand Central Terminal.” CBRE’s Annette Healey represented Wells Fargo. A CBRE spokeswoman said the broker declined to comment.

In 2016, Sage Realty completed a $60 million building-wide redevelopment of the property, which includes a redesigned lobby and arcade area, a new plaza, renovated elevators, upgraded building systems and a 15th-floor “sky lounge” with outdoor conference rooms and sunrise yoga classes.

WKO owns the building with Travelers Companies (the former developed the property and Travelers has been a partner since 1994). Tenants include Mitchell Silberberg & Knupp, which signed a lease for more than 18,500 square feet last month, as well as Citizens Bank, Omnicom Group, Medallion Financial, Kekst and Company and Carnegie Corporation of New York.

Source: commercial

Move Over, Plaza District: Meatpacking Is the City’s New Office Jewel

The names TenJune and Lotus have long since disappeared from the Meatpacking District.

Behold the new names to keep in mind when talking about the area: Google, Live Nation, Alibaba among others.

As companies focus on how to attract and retain employees, they are looking for cool and trendy areas in which to move, and the Meatpacking District has emerged as a top choice, brokers and developers told Commercial Observer.

“You are going to start hearing ‘21st century Plaza District,’ ” said William Silverman, a managing director and group head of investment sales at brokerage Hodges Ward Elliott.

Silverman is co-listing the converted eight-story office building at 430 West 15th Street with Cushman & Wakefield. He sees the influx of big, established companies in Meatpacking as the reason for why it will emerge as the next inevitable high-end office area.

“Fifty years ago your tycoon wore a suit and tie everyday and sent his kids to the Upper East Side [private schools], and they walked to their offices from a classic six on Park Avenue,” Silverman said. “Today, your business tycoon is more likely somebody who lives in the West Village or Chelsea, sends their kids to Avenues and wants to walk to their modern office in Meatpacking.”

And it’s really not that crazy to compare the Meatpacking to the Plaza District in terms of price. The average asking rent for office space in the Meatpacking District was $100.16 per square in the fourth quarter of 2017, up from $77.77 per square foot in the fourth quarter of 2016, according to a C&W report. The Plaza District’s average asking rent was $95.26 per square foot in the last quarter of 2017 and $95.99 in the same period in 2016, as per the report.

The price surge in Meatpacking is attributed to the influx of new developments that command much higher prices and to Meatpacking’s small office stock, which has roughly 5.8 million square feet of space. (By contrast, the Plaza District has about 87 million square feet of office space.) Moreover, Meatpacking only had a 2 percent vacancy rate in the fourth quarter of 2017, according to the C&W report.

Times have changed. Over the past decade, asking rents in the neighborhood mostly were in the $60s and $70s per square foot and even reached the $80s, according to C&W.

“In Meatpacking the decision makers want to be there and their employees do too,” Silverman said. “Meatpacking is a place where you start to see real estate being used as a recruiting tool.”

Meatpacking is bounded by West 17th Street to the north, Horatio Street to the south, Eighth Avenue to the east and the Westside Highway to the west, according to the Meatpacking Business Improvement District, a not-for-profit organization that advocates for the businesses in the area. And while the New York City Landmarks Preservation Commission designated the area a historic district in 2003—making it challenging to redevelop existing properties—developers are still building new projects to meet demand.

Perhaps the most notable of the developments is Rockpoint Group and Highgate Holdings’ renovation and expansion of 413 West 14th Street between Ninth and 10th Avenues. They are revitalizing the 109,515-square-foot property and joining it with the new 144,268-square-foot 412 West 15th Street to create one 255,000-square-foot 18-story office building.

The CetraRuddy-designed tower will be the tallest in the neighborhood at 270 feet and asking rents in the building range from $125 to $200 per square foot. So far six leases have been signed, totaling about 65 percent of the building, according to CBRE’s Paul Amrich, who is leasing the building with colleague Neil King.

In one of those deals, Paris-based asset management company Tikehau Capital signed a 10,000-square-foot lease for the top two floors of the building at $195 per square foot, according to The Real Deal.

“We started to see this area truly appeal to office tenants in general maybe eight years ago. What’s been really interesting is the change of industry type and maturity of tenants,” Amrich said. “In the past it was fashion firms and [startup] tech companies. Now, it’s insurance and financing companies.”

Aurora Capital Associates, which owns numerous buildings in Meatpacking, and Vornado Realty Trust recently completed a 165,000-square-foot building at 61 Ninth Avenue between West 15th and West 16th Streets. The property features 145,000 square feet of new office space with 12-foot ceiling heights and 20,000 square feet for retail. It also has private terraces on each floor as well as a rooftop green space.

buildingphoto35 Move Over, Plaza District: Meatpacking Is the Citys New Office Jewel
860 Washington Street. Photo: CoStar Group

And Aurora Capital and William Gottlieb Real Estate are finishing construction of a new 139,000-square-foot office and retail building at 40 10th Avenue between West 13th and West 14th Streets. The Studio Gang Architects-designed building, which is called the “Solar Carve Tower,” has office asking rents ranging from $135 to $200 per square foot.  

“It has unparalleled views of the Hudson River, the High Line, 15-foot floor-to-floor ceiling heights, uninterrupted views and an incredible roof deck,” said Jared Epstein, a vice president and principal at Aurora Capital. “It connects Meatpacking with the [Hudson] River and the High Line.”

In 2016, Romanoff Equities, the family development firm of C&W Vice Chairman Stuart Romanoff, and Property Group Partners completed the 114,000-square-foot glassy 860 Washington Street, just off the High Line. The office property has attracted Chinese e-commerce giant Alibaba, developer Delos Living and online lender SoFi as tenants.

“We produced on spec the project understanding that there was such demand by tenants who felt they needed an alternative to Midtown product, because the need to be in Midtown has changed,” Romanoff said. “Tenants want to be in more creative areas.”

And older properties are fetching top rents in Meatpacking as well.

Even corporate tenants want cool space,” said Leslie Himmel, a partner in Himmel + Meringoff, who has looked at buying buildings in the area. “They want exposed brick, open floor plans, wood, where they can see the bones of the building.”

William Kaufman Organization completed a repositioning of its 1912 property at 2 Gansevoort Street in 2015 with the addition of a new artwork-focused lobby, replacement of all of the windows and construction of an outdoor roof deck on the ninth floor (the top floor). At the time the asking rents in the Class A property were in the $100 to $115 per square foot range.   

The roughly 200,000-square-foot building, which William Kaufman Organization has owned since 1948, is fully leased save for the seventh floor and achieved rents in the high $80s per square foot and more than $100 per square foot for the top floors, according to Jonathan Iger, the CEO of William Kaufman Organization and the chairman of the Meatpacking BID.

On the seventh floor, William Kaufman Organization created a shared office floor called Swivel. Amenities for Swivel tenants include a pantry, a lounge, meeting rooms and conference rooms in a core area of the floor. In addition to the shared space, there are five prebuilt office suites that range in size—between 3,604 square feet and 5,677 square feet—with asking rents of $110 per square foot, Iger said.  

Since marketing for the Swivel office suites commenced in February, the landlord has already signed a lease and is in talks with three more tenants, Iger said. (Iger declined to name the tenant it has already placed in Swivel because of a contract agreement.)

As a testament to the area, Iger also noted that when Coronado Biosciences, a Massachusetts-based biopharmaceutical company, leased the ninth floor after the renovation of the property, the tenant informed him it looked at only two other properties in the city before choosing 2 Gansevoort Street: the GM Building and the Seagrams Building in the Plaza District.  

A big part of choosing 2 Gansevoort Street was the allure of the Meatpacking District and appealing to millennial employees, Iger said.

“I don’t think within a six-block radius [in the city] there is a better offering of food, culture and fashion that you can find with an office environment,” Iger said. “You see Google gobbling up as much space as they can. I think that we are just so centralized for everything that a young millennial employee wants.”

gallery at 2 gansevoort rainbow mountains Move Over, Plaza District: Meatpacking Is the Citys New Office Jewel
The gallery in the lobby of 2 Gansevoort Street. Photo: William Kaufman Organization

The Meatpacking District may have gotten its name from the 250 slaughterhouses that filled the area in 1900, but today it’s all about Google. (There are still a few meatpacking businesses left there.)

The tech giant purchased the 3-million-square-foot building at 111 Eighth Avenue between West 15th and West 16th Streets for $1.9 billion in 2010 and essentially has put its stamp on the area as it expanded numerous times since.

Most recently, in 2017 the company grew by 60,000 square-feet to 240,000 square feet at 85 10th Avenue between West 15th and West 16th Streets, as CO previously reported. And at Pier 57, Google plans to tack on 70,000 square feet for offices and 50,000 square feet for public engagement space to the 250,000 square feet it has already leased.

And instead of increasing its 400,000-square-foot offices at Chelsea Market, the tech giant has purchased the entire 1.2-million-square-foot building from Jamestown for $2.4 billion, as CO reported yesterday. (Google did not return a request for comment on its Meatpacking takeover plans, and a spokeswoman for Jamestown declined to comment about the sale.)

Google’s hardly the only household name to plant—or to soon plant—its flag in Meatpacking: Concert promoter Live Nation took an 100,000-square-foot sublease for the entire eight-story building at 430 West 15th Street between Ninth and 10th Avenues last year. And insurance company Argo sealed a deal for 48,000 square feet at 413 West 14th Street, as CO reported in March 2017. (Just a block outside of Meatpacking, coworking giant WeWork recently signed a lease for 122,000 square feet at 154 West 14th Street.)

Also, Insurance giant Aetna inked a 145,000-square-foot deal at Vornado and Aurora Capital’s 61 Ninth Avenue to relocate its headquarters from Hartford, Conn., as CO reported last June. It had plans to take all of the office space at the 165,000-square-foot Rafael Viñoly-designed building, which has a retail base.

A spokesman for Aetna declined to talk about the lease in depth but said that “CVS Health [which announced plans to acquire Aetna in December of 2017 for $69 billion] has no plans to relocate Aetna’s operations from Hartford after the transaction closes.”

With a signed lease, though, Aetna is on the hook and will have to find subtenants.

“We’ve been told that they might make a profit,” Epstein said. “In any other neighborhood that lease would be a big obligation.”

In keeping with the trend going on citywide, and even nationwide, Meatpacking retail tenants are trying to make their spaces more experiential.

aurora 40tenth 02 aerial 111616 Move Over, Plaza District: Meatpacking Is the Citys New Office Jewel
40 10th Avenue. Rendering: Aurora Capital Associates

A case in point, Starbucks plans to open a 20,000-square-foot store for a café and roastery on the ground floor of 61 Ninth Avenue, the second in the country (a third was recently announced for Chicago). Restoration Hardware took a lease for the entire 70,000-square-foot building at 9-19 Ninth Avenue between Little West 12th and West 13th Streets so it could build a gallery with a rooftop restaurant. It also plans to open a boutique hotel at 55 Gansevoort Street between Washington Street and Ninth Avenue.

Tesla Motors recently opened a 7,800-square-foot showroom at 860 Washington Street between West 13th and West 14th Streets and Genesis Motors (the luxury brand of South Korean car maker Hyundai Motor Company) will open a 40,000-square-foot location at 40 10th Avenue between West 13th and West 14th Streets.

Intersect by Lexus, a lounge, gallery and event space by the automaker, is at 412 West 14th Street. And Samsung is leasing the entire Morris Adjmi-designed 837 Washington Street, a 55,000-square-foot building between Little West 12th and West 13th Streets, where it doesn’t actually sell anything. Customers can test devices, experience virtual reality, see art installations, watch videos on a three-story screen and attend events.

“These are all best-in-class companies and they are all choosing that’s where they want to do their experiential concepts in New York City,” Hodges Ward Elliott’s Silverman said. “Meatpacking is emerging as where all the best companies in the world are doing business.”

With additional reporting provided by Max Gross.

Source: commercial

Google Closes $2.4B Acquisition of Chelsea Market

Google, which already occupies a significant portion of the 1.2-million-square-foot Chelsea Market building, has sealed a deal to buy the mixed-use property from Jamestown for $2.4 billion. The transaction was finalized today, according to a press release from Jamestown.

Jamestown will continue to manage the retail and food hall at Chelsea Market, a former Nabisco factory at 75 Ninth Avenue that occupies the full block between Ninth and 10th Avenues and West 15th and West 16th Streets, the release indicates. And according to The Wall Street Journal, Jamestown will retain the branding rights and intellectual property connected to the Chelsea Market name outside of Manhattan.

“For Jamestown, this is the highest-profile example to date of our unique approach to creating value, but it’s consistent with transformative projects we’ve successfully undertaken across the country,” Michael Phillips, the president of Jamestown, said in a statement. “It’s a combination of identifying underutilized locations, creative and visionary repositioning, value-creating management, rigorous financial analysis and patience.”

Jamestown purchased a 75 percent stake in Chelsea Market in 2003 for $280 million, according to property records. Then it bought out its partners in 2011, spending a total of $795 million, records indicate. Office tenants in 75 Ninth Avenue include Google in 400,000 square feet, as well as Major League Baseball and the Food Network.

Google has been growing its footprint in Chelsea. In 2010, the tech giant bought 111 Eighth Avenue from Jamestown, Taconic Investment Partners and the New York State Common Retirement Fund for $1.77 billion. That property, which houses Google’s headquarters, is across from Chelsea Market. Last year Google expanded by 60,000 square feet to 240,000 square feet at 85 10th Avenue between West 15th and West 16th Streets, as CO previously reported. And at Pier 57, Google plans to tack on 70,000 square feet for offices and 50,000 square feet for public engagement space to the 250,000 square feet it has already leased.

Google, a unit of Alphabet Inc., said in an official statement: “This purchase further solidifies our commitment to New York, and we believe the Manhattan Chelsea Market will continue to be a great home for us and a vital part of the neighborhood and community.”

Cushman & Wakefield‘s Douglas Harmon, Adam Spies, and Kevin Donner represented Jamestown in the deal. Harmon declined to comment. Darcy Stacom of CBRE represented Google. Stacom’s assistant said the broker is on vacation.

Source: commercial

Hedge Fund Kepos Capital Inks 20K-SF Lease at 11 Times Square

Alternative investment firm Kepos Capital has agreed to move its Manhattan headquarters to a 20,000-square-foot space at SJP Properties11 Times Square, Commercial Observer has learned.

Kepos signed a 10-year deal last month for part of the 35th floor at the 40-story, 1.1-million-square-foot office tower at 640 Eighth Avenue between West 41st and West 42nd Streets, according to sources with knowledge of the transaction.

The firm is expected to relocate to its new Midtown West space in August from its current location just one block south at the New York Times Building at 620 Eighth Avenue, where it presently occupies around 17,000 square feet on the 44th floor.

Asking rent in the deal was not immediately clear. Paul Glickman and Diana Biasotti of JLL represented landlord SJP—which owns 11 Times Square in partnership with PGIM and Norges Bank—while CBRE’s Ben Friedland and Michael Movshovich represented Kepos

In a statement, SJP CEO Steven Pozycki said Kepos wanted to “maintain its presence in the city’s premier transit hub,” referring to 11 Times Square’s proximity to Port Authority Bus Terminal across Eighth Avenue and Penn Station several blocks south. “For today’s financial services firms, it’s critical to have an office that provides state-of-the-art connectivity and is outfitted with the latest technology infrastructure,” he said.

Matt DesChamps, Kepos’ COO, said in a statement that the new space’s larger footprint and the firm’s “ability to design the space to our requirements” provided it the “opportunity to create a customized work environment to serve our clients and support our growing business in the years ahead.”

“Kepos Capital joins a roster of leading financial and technology firms attracted to one of the city’s most advanced and sophisticated commercial towers,” JLL’s Glickman said in a statement to CO. Law firm Proskauer and tech giant Microsoft anchor the office building, which was completed in 2010.

Representatives for CBRE did not immediately provide comment.

Kepos was founded in 2010 by former Goldman Sachs partners Mark Carhart, Giorgio De Santis and Bob Litterman, who previously led the quantitative investment strategies division at Goldman Sachs Asset Management. The firm manages $3 billion in assets for a global base of institutional investors.

Madrid-based amusement park operator Parques Reunidos signed a lease last year to anchor 11 Times Square’s retail space, where it is developing a 45,000-square-foot indoor entertainment complex, known as Lionsgate Entertainment City, in partnership with film studio Lionsgate.

Source: commercial

Euro Retailers Sense Opportunity Here While US Brands Look to Old World for Salvation

Last week, while JLL retail pro Michael Hirschfeld was in London for business, he learned of three U.K. retailers collapsing.

Those were the U.K. arm of Toys “R” Us, which went into insolvency administration, Maplin Electronics, which failed to find a buyer to get it out of administration, and dining chain Prezzo, which is being restructured. In addition, the 600-fleet London fashion chain New Look is looking to make deals with landlords to close underperforming stores and reduce rents.

The news sounds eerily similar to headlines in the U.S. as bankruptcies, e-commerce and the popularity of discount department and specialty stores have impacted the retail business on both sides of the pond.

“I think the retail challenges are universal,” said Hirschfeld, a vice chairman of national retail tenant services at JLL who spends 80 percent of his time bringing retailers from Europe to the U.S. and vice versa.

This comes, however, with a big caveat.

It is often said that what happens in the U.S. market will then follow in Continental Europe and Great Britain. But JLL warned in a retail report comparing the U.S. and Europe at the end of 2017, “we shouldn’t assume markets automatically mirror each other.”

In Europe, and the U.K. in particular, retailers braced themselves for the change in shopping patterns due to e-commerce faster and earlier than did their U.S. counterparts, according to the JLL report.

And beyond the internet, there are clear differences between the two markets.

One of the big ones is the sheer amount of retail space available in the U.S., in large part due to an excessive number of shopping centers. In the U.S., there is 13,713 square feet of leasable shopping center space per 1,000 people, JLL determined at the end of last year. In the U.K., by contrast, there is 3,175 square feet per 1,000 people, and in Europe as a whole, there is 2,335 square feet.

And the European retailers smell the opportunity—many view the U.S. as if “it’s on sale,” Hirschfeld said. “You’re seeing rent levels that you could achieve in the financial crisis. It’s a very opportune time. The demand is super strong.”

Hirschfeld brokered deals to bring British clothing company Superdry to various cities in the U.S. and is working on a deal for British toy store Hamleys to come to New York City. Accessories brand Furla, which comes from Milan and already has a store in Manhattan, is expanding with a new lease in Aventura Mall in Miami, Fla. (one of the top malls in the country), and one in the Forum Shops at Caesars in Las Vegas (another top U.S. mall) with likely another three or four more in major markets, he said of his client.

Susan Kurland, an executive vice president and a co-head of global retail services at Savills Studley, said that the difference between retail in Europe and the U.S. is the vacancies.

“The difference is their spaces are filled,” Kurland said. “You walk down our Madison Avenue, and almost every store on Madison Avenue is available.”

She is working with a high-end Chinese-owned Milan-based company, which is looking to enter the U.S.

“[The owner] feels the only places to expand are China and the U.S. as those are the two most important markets,” the broker said. “They’re in…the exclusive places in China. They’re on the important street in Milan. He feels that the U.S. is really important for his expansion.”

While there will be more store closures in Europe, JLL determined that the continent is “unlikely to experience the sheer volume of closures currently being forecast in the U.S.”

Another distinction between the U.S. and Europe is that most of Europe employs a high-street model rather than a shopping-center model. Furthermore, in shopping centers, the U.S. has relied on department store anchors (which have been one of the worst victims of e-commerce and commoditization), JLL noted. In Europe, on the other hand, shopping mall owners have been quick to switch gears with their anchor tenants, often turning to food-and-beverage concepts, and they are more diverse in their offerings.

Yet another important difference between European and U.S. leases is the rent structure. In the U.S., when a tenant signs a lease it knows what the rent is for the entire term. In the U.K., for example, you may sign a 10-year deal, but every couple of years you go through a fair-market rent review process, Hirschfeld said, so you don’t know your rent.

But one thing both places have in common is that consumers have so many options for how they want to shop.

“We’re seeing across the board a fragmentation of distribution,” said Betsy McCullar of Hilltop Alliance, who develops and executes marketing and strategy solutions for brands and businesses. “Western Europe is even more fragmented than the United States because, for example, the U.K. and Germany—and France, to some extent—have a big mature structure of department stores. But Italy and Spain are still dominated by one-off specialty stores.”

Among the European brands that are on the fast track in the U.S. are fast-fashion brands Swedish Hennes & Mauritz (H&M), Zara from Spain and the U.K.-based Reiss Ltd., The Wall Street Journal reported in May 2017. Amsterdam-based Scotch & Soda is also popping up in the U.S. with 28 free-standing retail stores, with a store at Woodbury Common Premium Outlets in Central Valley, N.Y. opening on March 30. European discounters like German grocer Aldi, German competitor Lidl and Irish clothing company Primark are on a tear in the U.S., Bloomberg Gadfly pointed out last October. International cosmetics companies like Rituals from Amsterdam are taking New York City by storm. Plus there are food chains like Wagamama, an Asian food concept that actually hails from London, that has set up shop in New York City and Boston.

When entering the U.S., European retailers focus on major cities for entrée.

Since they’re used to high streets at home, European retailers want to rent on a U.S. high street. And they generally enter by way of one of the gateway markets of New York City, Miami, Los Angeles, San Francisco, Chicago and Las Vegas, Hirschfeld said. They often choose a U.S. location that is most similar to where they hail from, Hirschfeld said.

“Brands usually like to do either the East Coast or the West Coast initially, and I believe that most start on the East Coast first,” said Robin Abrams, a vice chairman of retail at Eastern Consolidated, with New York City being a priority due to its tourist population, ease of navigation, walkability and great public transportation. For U.K. retailers, New York is logical, Abrams said, “because it is more similar” than other places in the U.S.

Interestingly, CBRE’s most recent annual global retail report highlighted Philadelphia as a target city for international retailers in 2016. That year, Italian furniture company Natuzzi Italia and Superdry set up shop in Philadelphia, the fifth-largest city in the U.S. The market was appealing, the report said, because of its increased millennial population, income growth, new multihousing developments, burgeoning food and retail scene and reputation as a tourist destination.

But there’s no refuting that New York City often is the beau ideal market for European retailers looking to expand abroad.

21 Euro Retailers Sense Opportunity Here While US Brands Look to Old World for Salvation
SUITING UP: EUROPEAN WOMEN’S STORE SUITSTUDIO HAS FARED WELL IN BROOKFIELD PLACE SINCE OPENING LAST NOVEMBER. Photo: Brookfield Property Partners

“Retailers looking for a first or second opportunity look at New York,” said Mark Kostic, a vice president of retail leasing in the U.S. at Brookfield Property Partners. “Everyone’s next step is a global flagship in New York.”

Kostic worked on the deal to bring European suitmaker Suitsupply to Brookfield Place. The brand has fared well since the men’s store opened about a year ago, and the women’s store Suitstudio opened this past November, he said.

Jason Pruger, an executive managing director at Newark Knight Frank, said he will be helping Black Sheep Coffee expand from London into the U.S. come springtime. He anticipates that Black Sheep will enter the country by way of New York City.

“We are looking to expand in the U.S. because we have be inundated with customer requests, particularly in the last few months—mostly Americans living in the U.K. or who came across Black Sheep while visiting the U.K.,” said Gabriel Shohet, one of the co-founders of Black Sheep Coffee. “New York City has many Black Sheep fans but is one of four U.S. cities [including Chicago, Washington, D.C.. and Atlanta] we have shortlisted as a potential starting base for a U.S. market entry.”

Faith Hope Consolo, the chairman of Douglas Elliman’s retail leasing, marketing and sales division, said that New York City is “the shopping capital of the world, and the No. 1 leisure activity in this country is shopping. Yes, New York City is the center of the world. Companies are willing to risk everything to make it here. Just like the song goes, ‘If you can make it here, you can make it anywhere.’ ”

Going the other way, U.S. retailers often start in London for their European expansion, where English is the native language. Indeed, companies from the U.S. marked the majority of new international retail entrants to London in 2016, according to CBRE’s global retail report. (Hirschfeld called London “probably the retail capital of the Europe in many ways.”)

But London is desirable for just about any retailer looking to make an entrance on a global stage. “Overseas brands continue to see London as the pathway to greater expansion” in Europe, the Middle East and Africa, or EMEA, the CBRE report said. London was the second most-targeted market globally for international retailers entering new markets in 2016 (behind Hong Kong) and 10 markets in EMEA made the list of 19 global cities with the greatest international retailer presence. And this was the year of the Brexit vote for the U.K. to leave the European Union, so presumably the vote did not rock anybody’s faith in London retail.

At the end of last year, New York-based high-end fitness brand Equinox opened its first standalone E by Equinox location—an even higher-end Equinox—in central London. “Opening our first standalone E by Equinox in one of the most esteemed neighborhoods in London was only fitting,” Gentry Long, the managing director of U.K. operations for Equinox, said in a press release in December 2017. “We’re thrilled to introduce an elevated take on the private members’ establishment with fitness at its core.”

Some in-demand cities for U.S. retailers going abroad are Germany’s Munich, Berlin, Hamburg and Frankfort for fashion brands and food and beverage brands, Hirschfeld said. And there’s Paris, France and Milan, Italy. He has not seen a lot of demand for a Spain brick-and-mortar location.

In the last coupe of years, Hirschfeld’s team has brought Detroit-founded Shinola watch, bicycle and leather company to London. And his team brought Seattle-based outerwear company Filson to London.

“What you must look at when you’re looking throughout Europe, or Asia or South America is products that are transferrable to other markets,” Virginia Pittarelli, a principal of Crown Retail Services whose clients have included Sephora and Godiva, told Commercial Observer late last year.“That’s really the key.”

Source: commercial

Changes Afoot at Savills Studley 

There’s a bit of musical chairs going on at Savills Studley, Commercial Observer has learned.

Facing retirement within the next few months, John Pantazis has stepped down from his COO post at the firm and has become an executive vice president and director as the firm transitions to a new COO, Mitchell Steir, the chairman and CEO of Savills Studley, told CO. Savills Studley former CFO Al Petrillo has become the COO.

No new CFO has been named, but Vic Russo, who was the senior vice president of finance under Petrillo, has assumed his former boss’ duties, Steir said.

“These are just personnel changes that happen within a company,” Steir explained.

The firm has also promoted Patrick McGrath to a newly created position of CIO and head of client technologies. He was the head of cross-border transactions at Savills Studley, executing traditional commercial real estate transactions and developing best practices, technology solutions and analytic tools for companies with multi-national footprints, a company press release about the new position provided exclusively to CO indicates.

In a more sweeping measure, Savills Studley—which came out of the 2014 acquisition by international real estate adviser Savills of U.S.-based tenant representation firm Studley—has promoted 87 professionals throughout the United States in all service offerings. Of them, 39 were made vice chairman, 17 of them in New York City, a spokeswoman said. One broker speculated that this move was done to try and retain its talent. Steir said that he didn’t think a title would “lead anyone to stay some place they don’t want to stay.”

Steir said the 800-person company is always promoting people, and naming people vice chairman for the first time “in many ways was long overdue.”

He added: “The vice chairman promotions is because if you look around at our peer group you’ll notice that there are hundreds of vice chairman that are employed and we have had none. So, the fact that we haven’t had any has been the anomaly. “

On the West Coast, Savills Studley suffered a blow with the loss of a big retail investment sales broker.

At the end of January, power broker Bill Bauman, who co-headed Studley’s national retail services group in Los Angeles, left for Newmark Knight Frank, as The Real Deal reported. He took with him his four team members, including Kyle Miller, according to Mark Sullivan, the regional manager of Savills Studley in Southern California. (Bauman and Miller didn’t immediately respond to requests for comment.)

Sullivan explained the Bauman team, which specialized in retail investment sales, as such: “It was a self-contained, self-sufficient team who for the most part worked together, closed deals together [and] didn’t have a lot of interaction with other professionals in the company.”

The team has already been replaced.

“The hole we need to fill was [retail] investment sales and we have filled that hole,” Sullivan said. The five “replacement” agents hail from CBRE and Colliers International.

Source: commercial

WeWork Ups Pay for Brokers at Trio of Firms Who Find and Fill Coworking Space

WeWork has signed agreements with CBRE, Cushman & Wakefield and JLL in North America, offering brokers at the firms greater compensation if they find and fill coworking space, Commercial Observer has learned.

“WeWork is unique in that as we become more sales driven with our real estate approach we can partner with real estate firms on both sides—on the site selection and lease sourcing side and the client member introduction side,” Julia Davis, the head of transactions and analytics for WeWork, told CO. “We are hoping to leverage those relationships.”

Brokers at CBRE, C&W and JLL will get a 20 percent fee on a one-year lease and 5 percent on expansions and renewals. That compares to the sums WeWork has been offering individual brokers across the board for the last year: 10 percent on year one of a lease and 2 percent for expansions and renewals, Davis said.

“WeWork will partner with these firms on a non-exclusive basis to source a set (i.e. agreed upon) square footage for WeWork locations in North America, and in return, the [commercial real estate] firms will introduce new clients to WeWork, leading to more closed sales and strengthened relationships,” according to bullet points WeWork provided to CO. Davis declined to provide the square footage.

The idea is that the CBRE, C&W and JLL brokers will be “ambassadors” for the brand, Davis said. WeWork will “reward those CRE firms that introduce new members to WeWork with additional real estate sourcing assignments,” the company promises.

It seems that WeWork’s efforts to ingratiate itself in the broker community are working.

“One-and-a-half years ago, there was little [broker] contribution,” Davis said. “Now it’s 20 to 25 percent of desks on a monthly basis due to brokerages across all markets company-wide.”

The partnership initiative is starting in North America and if successful, WeWork will scale it globally and establish other such relationships.

A broker at one of the partner firms said of the agreements: “It is a minor development. Not even sure what it means other then we will get a few assignments as will the others to find them space and offer WeWork [spaces] to our clients as an option.”

Another broker, at a different partner company, said that while he would put a tenant in a WeWork space if it was appropriate, the increased payout would not compel him to do so.

The office-space provider business has been getting increasingly crowded, and one broker suggested WeWork has upped the ante to one-up the competition.

But WeWork is not the only office space provider forging relationships with brokerages. Knotel has partnered with Newmark Knight Frank and secured an undisclosed investment from NKF’s Barry Gosin. (Gosin is also an adviser to Knotel.)

NKF “is a very valuable partner of ours. In addition to the partnership, they made a financial investment,” Eugene Lee, Knotel’s global head of real estate and business development, told CO. “It’s an integration between Newmark and Knotel where they’re helping us find spaces and bringing spaces they represent into Knotel.”

According to a January press release from Knotel: “The partnership will allow NKF’s audience of owners and other clients to have streamlined access to Knotel’s footprint across New York City, San Francisco and London.”

Lee said that unlike WeWork, Knotel is not increasing the pay for NKF brokers.

“We are paying them standard rates as they would get compensated in a standard lease format,” he explained.

So why would a NKF broker be inclined to put a tenant in a Knotel space?

Knotel will “give preference to the company we have a relationship with,” Lee said, when faced with multiple companies competing for floors.

As for what WeWork is doing, Lee said, “When you’re having to give promotional commissions and pay brokers to bring you members, that’s generally a sign of weakness. In general if you’re discounting and giving out promotional incentives, it’s not a good sign for the business.”

Spokespeople for CBRE and C&W declined to comment. A spokesman for JLL didn’t respond to a request for comment and a NKF spokeswoman didn’t respond with a comment.

Source: commercial

City Strikes Pricey Deal for Pre-K at Extell’s UES Condo Tower

The New York City School Construction Authority has leased the ground floor of Gary Barnett’s 30-story condominium building on the Upper East Side for a pre-kindergarten program, according to public records.

The agency, which develops and leases on behalf of the city’s Department of Education, inked a 15-year deal for 11,492 square feet at the base of The Kent, Extell Development Company’s 83-unit condo project at 200 East 95th Street at the corner of Third Avenue. The DOE will open a public pre-kindergarten in September in the Beyer Blinder Belle-designed building, according to a spokesman for the SCA.

Although it’s still under construction, the Kent is set to open at the end of 2018 and currently has apartments for sale ranging from a two-bedroom, two-bathroom unit asking $2.5 million to a five-bedroom, four-and-a-half-bath pad for $8.4 million.  

Howard Kesseler of Newmark Knight Frank represented the SCA in the transaction, and it’s unclear if Extell had a broker. Kesseler didn’t immediately respond to a request for comment. A spokeswoman for Extell did not respond with a comment.

The city will pay $1.97 million annually ($171 a square foot) for the first five years of the lease, per the memorandum of lease on file with the Department of Finance, $2.17 million ($188 a square foot) annually for the following five years, and $2.38 million ($207 a square foot) for the 10th through 15th years of the lease. Asking rents for educational and medical space in Manhattan averaged $47 a square foot in 2017, according to data from CBRE.

While the rent seems expensive, schools have few alternatives when it comes to leasing space in pricey areas of Manhattan and Brooklyn. Commercial Observer recently talked to private school administrators about the struggle to find affordable locations to rent or buy in Brooklyn, and the public school system faces similar financial pressures as it hunts for space to expand throughout the five boroughs.

David Lebenstein, who heads C&W’s not-for-profit advisory group and handles deals for the SCA in the outer boroughs, said the rent might be justified if there’s a usable basement in addition to the 11,492 square feet stated on the lease.

“My gut tells me that they got a usable basement with high ceilings and some light and that it’s probably really 22,000 square feet, so that’s how they can justify it,” Lebenstein said. “It’s priced like retail, there’s no two ways about it. We did deals [for the SCA] all over Queens and it’s $30 to $50 a square foot, and rents are similar are in Washington Heights and Harlem.”

He added, “There are not a lot of options. They had a pressing need in this district, and they were probably oversold on whatever pre-k they had and needed more school seats.”

The pre-k lease comes as Mayor Bill de Blasio is aggressively expanding the city’s public pre-kindergarten programs. When the mayor took office in 2014, he announced that he would offer free, full-day pre-k for every 4-year-old in New York City. Then in April 2017, he rolled out universal pre-k for 3-year-olds, which would serve an expected 62,000 children.

Source: commercial