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Category ArchiveCushman & Wakefield

The Middle Dominates in Down Markets

From almost every perspective, the 2017 investment sales market left a lot to be desired. While the final numbers for the year are still a couple of weeks away, the year-to-date numbers through the middle of the fourth quarter remained consistent with the trends we saw unfolding over the past two to three years.

The cyclical peak of the investment sales market in New York City was clearly in 2014 and 2015. In 2014 there were 5,534 properties sold in the city, an all-time record by more than 10 percent. This banner year was followed up by a dollar volume of sales in 2015, which hit $80.4 billion, another all-time record. Since these record years, activity in both of these key volume metrics has been sliding backward. The year-end numbers for the number of properties sold will likely show a third year of reduced activity and the dollar volume will likely show a second year of retreat. Values have also been sliding, particularly in the Manhattan submarket where all product types are down slightly. In the outer boroughs, values were mixed with some property types up slightly while others followed Manhattan’s lead.

While the metrics of volume and value are the most talked about in the market—and they should be because they are so indicative of how the market is performing—other metrics that are indicative of the health of the investment sales market are the average price of a property sold and the percentage of transactions occurring above $100 million. Both of these metrics are highly correlated with the health of the sales market.

On a citywide basis, midway through the fourth quarter of last year, the dollar volume of sales was on pace for about 41 percent of it attributed to transactions at $100 million or above. This will be the lowest percentage the market has seen since 2009 when the percentage was 33 percent. Over the last nine years, the average percentage has been 54 percent and was at a high of 67 percent in the market’s peak year of 2015. If we look at just Manhattan, the percentages are, not surprisingly, much higher. In 2017, the percentage of the dollar volume of sales occurring in the over-$100 million market is likely to end up around 60 percent. If this is the final number, it will also be the lowest percentage since 2009. The average percentage over the last nine years has been about 67 percent and hit a cyclical peak in 2015 at 81 percent. These numbers substantiate the fact that the “middle market” becomes much more dominant in tougher times.

Given the impact of extraordinarily large transactions at these dollar volume metrics, it is important, and in many ways more telling, to look at the number of properties sold.

On a citywide basis, midway through the fourth quarter of 2017, just 6 percent of all sales exceeded $100 million. Therefore, 94 percent of all sales in the city were below $100 million and 83 percent were below $25 million. In Manhattan, again 6 percent of the sale transactions were above $100 million. The biggest difference between the entire marketplace and Manhattan is the activity in the $25 million to $100 million bracket. Looking at the broader market, 11 percent of sales transactions occurred in this range while the percentage grew to 19 percent in Manhattan. Comparing these metrics over time would have to be inflation (appreciation) adjusted to have credibility, and we are working on that analysis.

These additional metrics support the position I put forth back in the fourth quarter of 2015 that the investment sales market in New York City was entering correction mode. We are now in the 28th month of this correction, which has been slow and drawn out. The reason for this is because there hasn’t been any particular event to catalyze this correction. It has simply been the natural cyclicality of the market taking hold. So the more important question is, How long will this correction last and what will the impact on value be when things start to improve? During the recent Great Recession in 2008 through 2010, values in New York City dropped on average by 38 percent on a price-per-square-foot basis. Even worse, during the Savings and Loan Crisis in the early 1990s, values dropped on a price-per-square-foot basis by a whopping 58 percent on average. If the worst we see in this correction is a single-digit drop, we should consider this a win, at least on a relative basis. I should also note that during, and subsequent to, the recession in the early 2000s, volumes dropped for four consecutive years but average values never fell.
When we have the 2017 year-end numbers in hand, we will provide insight into the market’s direction. Meanwhile, there are many externalities that could affect the market this year.

Robert Knakal is the chairman of New York investment sales for Cushman & Wakefield.

Source: commercial

City Set for 33-Year High in New Office Supply Through 2019: C&W

Manhattan is set to see more new office supply come online over the next two years than at any point since the mid-1980s—a dynamic that will bolster the city’s aging office stock but could hold asking rents in check and keep landlord concessions at historic highs, according to Cushman & Wakefield.

Led by sprawling Far West Side megaprojects like Hudson Yards and Manhattan West, the 12.6 million square feet of new office construction due to hit the market over the course of 2018 and 2019 is the most of any two-year period since 1985 to 1986, the brokerage said in a press briefing today overviewing the state of the city’s office market.

While 7.3 million square feet of that space has already been preleased, it is part of an enormous 22.1-million-square-foot influx in new office supply set to arrive in Manhattan over the next five years—13.7 million square feet of which is still available for lease, C&W said. That influx is already placing downward pressure on asking rents for the city’s existing office stock and is expected to keep concessions at “historical high levels,” according to the brokerage.

Richard Persichetti, C&W’s vice president of research for the tri-state region, said that while the new construction is a positive considering the city’s “aging office stock,” it will exacerbate a dynamic that has seen “more tenant improvement allowances than ever before” and could cause a hike in vacancy rates as new space is delivered. Manhattan’s overall office vacancy rate dropped 0.4 percent to 8.9 percent at the end of 2017—”its lowest level in 18 months,” he noted.

New office construction is also commanding a 27.5 percent premium over existing Class A space, according to the C&W report, with the new development consequently driving down rents for the city’s existing office supply. Overall office asking rents in Manhattan fell 0.8 percent in 2017 to $72.25 per square foot—though Persichetti said rents should be “flat to increasing” in 2018 as the new, “higher-priced space” comes online.

In total, Manhattan saw 30.5 million square feet of new leasing activity last year, which was up 16 percent from 2016. Midtown office leasing was up 10.4 percent to 19.7 million square feet, while the Downtown market saw a 63.6 percent jump to 5.8 million square feet. The supply-constrained Midtown South saw a 2.1 percent increase in new leasing activity to 5 million square feet.

Leasing activity was characterized by a sizable uptick in the volume of major, 100,000-plus-square-foot deals; the 56 such leases signed last year were the most on record, according to C&W, and accounted for 40 percent of all Manhattan leasing activity—with 22 of those deals for 250,000 square feet or more.

The financial sector, which saw employment levels in the city rise to a 16-year high in 2017, drove much of the new leasing activity; financial industry tenants leased 5.5 million square feet of space last year, up 60 percent from 2016, the brokerage said. The technology, advertising, media and information (TAMI) sector, meanwhile, softened in terms of employment—losing more than 9,000 jobs through the first 11 months of the year—but still saw a 12 percent increase in leasing activity to 4.3 million square feet, according to C&W.

Source: commercial

Video: Pop Damn! How Pop-Ups Are a Year-Long Phenomenon

It’s not just for the holiday season. Love ’em or hate ’em, pop-ups are here to stay. Retail Details looks at why they’re advantageous for tenants and landlords. We check in with Los Angeles’ jewelry retailer Vrai & Oro as they build out a space that they got on Mott Street via Appear Here.

Source: commercial

Law Firm Bryan Cave Renews Its 100K SF in Midtown West for 15 Years

Bryan Cave is staying put in its 100,000 square feet on the 34th through 37th floors at 1290 Avenue of the Americas between West 51st and West 52nd Streets.

A company spokeswoman told Commercial Observer, “We have been very happy with our prime New York City location and look forward to continuing to welcome our clients from New York City and around the world who visit our offices.” The law firm has been in the space since 1989. The renewal commences in 2019.

According to Crain’s New York Business, which first reported on the news, rents for the firm’s space were in the high $80s per square foot. The deal is for 15 years, the Bryan Cave spokeswoman told CO. The law firm “will be undertaking a complete renovation of our space,” she said, noting it will become a “beautiful new work environment.”

Other tenants in Vornado Realty Trust‘s 41-story, 2.1-million-square-foot building office tower include investment management firm Neuberger Berman, with its global headquartersCushman & Wakefield, which last month expanded its offices to more than 200,000 square feet, and Morgan Stanley.

Glen Weiss and Edward Riguardi of Vornado represented the landlord in-house. Lewis Miller’s team at CBRE represented Bryan Cave, the law firm’s spokeswoman said. A spokesman for Vornado declined to comment and a spokeswoman for CBRE didn’t immediately respond to a request for comment.

Source: commercial

Siemens Moving NYC Offices to Vornado’s 1 Penn Plaza

German manufacturing giant Siemens is reportedly moving its New York City offices to Vornado Realty Trust’s 1 Penn Plaza.

The company has agreed to take 35,000 square feet on the 11th floor of the 57-story, 2.7-million-square-foot office tower, which occupies the block bound by West 33rd and West 34th Streets and Seventh and Eighth Avenues, Crain’s New York Business reported Tuesday.

The deal includes an option for Siemens to take the entire, roughly 60,000-square-foot floor should it require additional space, according to Crain’s, with the German conglomerate reportedly paying rents in the high $60s per square foot. Siemens plans to begin occupying its new space by this July; the company’s current New York City corporate office is located at Mitsui Fudosan America’s 527 Madison Avenue in Midtown, according to its website.

Peter Van Duyne of Cushman & Wakefield represented the tenant in the transaction, while Vornado was represented in-house by Josh Glick and Jared Silverman. Representatives for C&W and Vornado did not immediately provide comment.

Siemens will occupy space left vacant by U.S. Customs and Border Protection, according to Crain’s, with the federal agency having relocated its offices to 1 World Trade Center in the Financial District.

The massive 1 Penn Plaza is the centerpiece of Vornado’s sizable portfolio of commercial real estate assets in the area surrounding Pennsylvania Station, which include 2 Penn Plaza, 11 Penn Plaza, 330 West 34th Street and 7 West 34th Street. And alongside partners Related Companies and Skanska, the real estate investment trust is undertaking the sprawling redevelopment of the James A. Farley Post Office Building into the new Moynihan Train Hall, which will include 730,000 square feet of office space and 120,000 square feet of retail.

Other tenants at 1 Penn Plaza include Cisco Systems, GTT Communications, TradingScreen and Fuse Media.

Source: commercial

Hyundai Luxury Car Division Taking 40K SF of Retail in Meatpacking District

Luxury car brand Genesis Motors has reportedly inked a lease for around 40,000 square feet of retail space at the Solar Carve Tower presently under construction at 40 10th Avenue in the Meatpacking District.

Genesis, a wholly owned subsidiary of South Korean automotive manufacturer Hyundai Motor Company, is said to be taking the space at the base of the 10-story, 139,000-square-foot office tower currently being built next to the High Line between West 13th and West 14th Streets, The Real Deal reported Wednesday.

The transaction ranks as one of the priciest retail leases of 2017, according to TRD, with Genesis paying an estimated annual rent of $11 million, or roughly $275 per square foot. The deal will likely see Genesis take all of the Solar Carve Tower’s roughly 27,700 square feet of ground-floor and lower-level retail space, according to property marketing materials, as well as additional office space (such as most or all of the building’s 13,700-square-foot second floor).

Jared Epstein of Aurora Capital Associates handles retail leasing at 40 10th Avenue on behalf of the landlord—a partnership between Aurora and William Gottlieb Real Estate—while Richard Nassimi and Michael Lohan of The Nassimi Group represented the tenant, according to TRD. Representatives for Aurora and The Nassimi Group did not return requests for comment.

Construction on the Studio Gang Architects-designed tower, notable for its gem-like glass facade, began earlier this year and is slated for completion in early 2019. The building will feature a 10,000-square-foot shared outdoor roof deck and 8,000 square feet of outdoor space on the second floor adjacent to the High Line, as well as private outdoor terraces on eight of the nine office floors.

In September, TRD reported that Aurora and William Gottlieb had secured $120 million in construction financing from Bank of the Ozarks for the project. A Cushman & Wakefield team led by Bruce Mosler is handling office leasing at 40 10th Avenue, though no office tenants have yet been announced.

Source: commercial

Paramount Promotes Leasing Exec to Ted Koltis’ Role, Seals 100,000-SF Office Deal

Paramount Group has promoted leasing executive Peter Brindley from senior vice president to executive vice president of leasing, a role formerly held by Ted Koltis. The news comes a day after the company announced it hammered out an agreement to bring open-source software database company MongoDB to its 48-story office tower at 1633 Broadway.

Brindley joined Paramount in 2010 and has quickly risen through the ranks of the office management company’s leasing division. In his new role, he will continue to manage the leasing of the company’s entire portfolio of commercial properties across New York City, Washington, D.C., and San Francisco. He replaces Koltis, who is leaving the company after six years “to pursue other opportunities,” according to a release from Paramount. A spokesman for Paramount didn’t respond to inquiries to talk to Brindley and Koltis, and neither broker responded to a request for comment.

Before arriving at Paramount, Brindley was a senior director at Tishman Speyer, where he handled the leasing of Rockefeller Center, the MetLife Building and 666 Fifth Avenue. (Tishman Realty and Construction developed 666 Fifth in 1957 and, as the company dissolved in 1976, it sold the 41-story building to Japanese developer Sunitomo for $80 million. The re-formed Tishman Speyer Properties then acquired the trophy office property for $518 million in 2000. In 2007, it sold the property to Kushner Companies for a then-record-breaking $1.8 billion.) Before heading to Tishman in 2004, he worked in the brokerage services group at CBRE.

“Peter is an extremely skilled leader and has formed significant and valuable relationships in his more than 15 years of experience in real estate,” said Paramount CEO and President Albert Behler in prepared remarks.

He added that Brindley “has done a remarkable job leasing Paramount’s 9 million square foot Class A portfolio in New York. We look forward to Peter leading our leasing team as we continue to execute our strategy to unlock value for our shareholders.”

1633 broadway Paramount Promotes Leasing Exec to Ted Koltis’ Role, Seals 100,000 SF Office Deal
1633 Broadway. Photo: CoStar Group

Meanwhile, Paramount finalized a 106,230-square-foot lease with MongoDB at 1633 Broadway, its 48-story skyscraper between West 50th and West 51st Streets. The landlord announced the 12-year deal in a press release this morning. The software company will take the 37th and 38th floors of the 48-story tower, as The Real Deal first reported last month.

MongoDB will relocate from the former New York Times Building at 229 West 43rd Street, where it has grown out of the 60,000 square feet it has occupied since 2013.

A CBRE team of Paul Amrich, Howard Fiddle, Stephen Siegel, Patrice Hayden Meagher, Emily Jones and Robert Hill handle leasing at the building, which was constructed in 1967 and designed by Emery Roth & Sons. Cushman & Wakefield’s Dirk Hrobsky, Chris Helgesen, Peter Trivelas and Gary Ceder represented MondoDB. Neither brokerage immediately responded to requests for comment via spokespeople.

Source: commercial

NYU Langone Health Renews 74K SF in FiDi

NYU Langone Health has signed an early renewal for 74,069 square feet at 14 Wall Street that is home to the hospital’s administrative offices, Commercial Observer has learned.

The institution, which has been in the 37-story tower for a decade, will continue to occupy the entire ninth and 10th floors of the building between Nassau Street and Broadway—formerly known as the Bankers Trust Building—for another 15 years.

Asking prices in the 1-million-square-foot office building near the New York Stock Exchange range from the mid-$40s per square foot to the low $50s per square foot, according to Cushman & Wakefield.

“Ownership was delighted to renew their lease with NYU Langone Health,” C&W’s Alan Wildes said in prepared remarks. “Situated in a vibrant Downtown location, 14 Wall Street presents an exceptional opportunity for NYU Langone Health to continue to thrive.”

Wildes worked alongside colleagues Stephen Bellwood, Jonathan Fein, Carlos Suarez and Lou D’Avanzo in representing the landlord, billionaire Alexander Rovt. C&W’s Mark Mandell and Bruce Mosler handled the deal for NYU Langone Health. Mandell and Mosler declined to comment via a spokeswoman for C&W.

The landmarked 1912-skyscraper at 14 Wall Street features 13-foot ceiling heights and renovated windows, elevators and common corridors, as well as a modern lobby. Existing office tenants include Amerigroup and Barclays, while retailers there include T.J. Maxx and Starbucks and Equinox.

Source: commercial

RFR Sells Tribeca Loft Conversion to Iliad Realty Group for $55M

Aby Rosen’s RFR Realty has unloaded a nine-story, mixed-use loft building at 67 Vestry Street in Tribeca to Iliad Realty Group for $55.5 million, city public records show. The sale closed last Wednesday.

The second through ninth floors of the 61,250-square-foot former warehouse are divided into 25 apartments, according to marketing materials from Cushman & Wakefield. Of the 25 loft units, a few are still occupied by rent-stabilized tenants, but the majority are vacant, according to C&W’s Robert Knakal, who helped broker the sale. Fourteen units are rent stabilized, according to the most recent property tax bill. The property also has 7,000 square feet of vacant ground-floor retail, the brochure from C&W notes.

RFR purchased the building for $16.5 million in 2005, property records indicate. The company filed plans to build an 11-story, 42-unit residential building on the site in 2014. However, it looks like the developer abandoned the project after 67 Vestry’s stabilized residents fought the development plans and attempted to get the building landmarked. A spokeswoman for RFR declined to comment on the sale, and Iliad didn’t immediately return a request for comment.

Knakal along with C&W’s Will Suarez and Jon Hageman represented the buyer and the seller in the deal.

“I think this was a transaction that was good for the buyer and the seller, and the site has tremendous potential,” Knakal said. “It’s an excellent location and there’s tremendous upside on that property.”

Iliad also took out a $40 million mortgage from Apollo Commercial Real Estate Finance, according to public records.

Source: commercial

Retail Details: Live From MAPIC

What’s the problem with retail? What are retailers doing to help themselves in this cruddy climate? Are international retailers interested in the U.S.?

Those were the questions on our mind when Commercial Observer traveled to the south of France, last month, to attend the MAPIC conference on retail.

We sat with some of the best brokers in the business and asked their thoughts — here’s what they had to say.

Source: commercial