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Category ArchiveHudson Yards

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

After Nabbing $238M Daiwa Construction Loan, HAP Touts Chelsea’s Attributes

Eran Polack is happy to be in Chelsea.

After sealing a $238 million construction loan for his new two-building residential complex at 213-227 West 28th Street, between Seventh and Eighth Avenues, the HAP Investments chief executive officer told CO that he’s bullish about the neighborhood’s prospects.

“We really like the area,” Polack said. “It’s close to the Fashion Institute [of Technology], Whole Foods and Midtown Tennis. The [short] distance to the Google offices, to Hudson Yards and to Madison Square Garden make it very exciting.”

That location has given Polack a rosy outlook for the buildings’ revenue.

“I am very, very confident in the rent,” Polack said. “I don’t think there are a lot of buildings [going up] in Manhattan between Seventh and Eighth Avenues.” He added that he expects strong demand from students at FIT and families whose children attend Avenues, a school at 259 10th Avenue that serves children from pre-K through 12th grade.

Daiwa House Texas, an American subsidiary of Daiwa House Group, the largest homebuilder in Japan, will provide the floating-rate, 30-month loan—the company’s first in New York, which will have an interest rate of Libor plus five percent.

The complex’s two buildings, which will be split among rental apartments and condominiums, will cover eight contiguous lots, the most sprawling such site developed in recent Manhattan history, according to HAP. The condo building will feature 88 apartments, and the rental building 112.

Plans for the site also include ground-floor and cellar-level retail space in the 20-story apartment towers. Residential perks include a full 17,000-square-foot floor for amenities, and an automated parking garage where, according to HAP, robots will automatically retrieve residents’ cars from nearly 50 parking spaces.

The architecture firm DXA studio has designed the complex, and construction—excavation for which is already underway—will be managed by Rinaldi.

Polack expects construction to finish by the end of 2019, and Douglas Elliman’s Fredrik Eklund—famous for his role on the television show Million Dollar Listing—will manage sales and marketing for the apartments.

Daiwa House Texas could not be reached for comment.

Earlier this autumn, Polack found himself in an embarrassing legal snit when as Israeli court found that he lied in 2010 about the value of the diamonds he lost in a Hong Kong robbery. He does not face criminal charges. Polack declined to comment on the matter through a spokeswoman, who said that “the civil case is still on appeal in Israel.”


Source: commercial

Cove Lands $479M Construction Loan for Hudson Yards Office Tower

Cove Property Group and its equity partner, Boston-based hedge fund Baupost Group, have secured a whopping $479 million non-recourse loan for construction at 441 Ninth Avenue, which they will rebrand as Hudson Commons, Commercial Observer has learned.

Apollo Global Management and its subsidiary Apollo Commercial Real Estate Finance provided the behemoth loan.

HFF negotiated the financing on behalf of Cove. Michael Gigliotti, a senior managing director at the brokerage, declined to give its terms, but said that it follows the contours of a typical construction loan.

The Cove-Baupost partnership bought the property, situated between West 34th and West 35th Streets, for $330 million in 2016 from insurer EmblemHealth, which had occupied the entire building. The current structure comprises 423,000 square feet on eight stories, but Cove plans to redevelop the property by adding an additional 17-story structure atop the building, expanding the total square footage to approximately 700,000.

Internal demolition has already begun, according to Kevin Hoo, a managing partner at Cove. Construction will begin on the new tower in January, he said, and the entire building will be tenant-ready by the end of summer 2019.

Meanwhile, Cove hopes to begin leasing the lower eight stories by the end of next year, even as construction continues on the tower. Cove has maintained the building’s certificate of occupancy, which Hoo said will make the lease-up relatively hassle free.

“This is a very diverse type of building that should attract all types of tenants,” Gigliotti said, noting that its location between Hudson Yards, to the west, and Penn Station, to the east, would make it an attractive destination for commuters.

As a result, Gigliotti said, lenders competed fiercely to back the project.

“It was a highly contested process,” Gigliotti told CO. “All the big names in the construction lending space were interested.” Apollo, he added, had already been involved in the project as a partner that funded, along with Deutsche Bank, the $220 million bridge loan for the property Cove inked in 2016.

Gigliotti noted that Apollo also offered “new features” in its financing package, but declined to give details.

Hoo said that a variety of companies have already courted Cove for office space at Hudson Commons.

“We’ve been entertaining a number of large tenants,” the Cove founder said. “They include fashion, technology, media and infotech [companies], along with a bunch of traditional banks.”

Because the new tower will have a significantly smaller cross section than the eight-story original building, Cove will be able to offer a variety of floor-plan sizes, which Hoo listed as a key element. Each floor of the existing building offers 50,000 square feet; the new tower will sport approximately 16,000 square feet per floor.

“Our floor-by-floor lease-up plan meant that we could diversify [our tenants] and mitigate the downside risk,” Hoo said. “That business plan helped lenders get comfortable.”

HFF’s deal team was led by Gigliotti, Geoff Goldstein and Michael Tepedino. Gigliotti said that Ben Gray, who was unavailable for comment, spearheaded the financing for Apollo.

The Baupost Group, Cove’s equity partner, is a secretive hedge fund that the Wall Street Journal called one of the world’s largest in 2014, when it managed $27 billion. The fund has made headlines recently for confirming that it owns nearly $1 billion of troubled Puerto Rican debt. Officials at the firm did not respond to a request for comment.

Hudson Commons is the second major New York property for Cove, which was founded in 2015. Last year, the company purchased 2 Rector Street, a 26-story, 470,000 office tower in lower Manhattan, and rebranded it as 101 Greenwich.


Source: commercial

[Video – Commercial Observations] The Big Picture: Q&A With Arthur Mirante

Commercial Observer sits down with Avison Young’s Arthur Mirante to discuss Hudson Yards, big moves in the major brokerage firms and how they landed the Thor portfolio.

Missed last month’s video? We spoke with Douglas Durst about the infamous debt clock at 1 Bryant Park and how the Durst Organization is attracting tenants to midtown. View the video here.

About Berdon LLP, Accountants and Advisors: Berdon LLP is ranked among the nation’s top CPA and advisory firms. With nearly 400 professionals, clients benefit from our comprehensive array of accounting, tax, financial, and management advisory services. Through specialized expertise and a real estate team of more than 100 professionals, we advise many of the country’s prominent real estate entities and are one of the largest Real Estate Practices in the nation. 


Source: commercial

José Andrés-Helmed, 35K-SF Food Hall to Open at 10 Hudson Yards

Celebrity chef José Andrés is the latest purveyor of cuisine to commit to an ambitious new concept at Related Companies and Oxford Properties Group’s Hudson Yards megaproject—with AndrésThinkFoodGroup agreeing to open a 35,000-square-foot, Spanish-themed food hall at 10 Hudson Yards.

Andrés is teaming with brothers and renowned Spanish chefs Ferran and Albert Adrià on the indoor-outdoor concept, which will anchor 10 Hudson Yards’ food offerings and represents the Adrià brothers’ first endeavor in the U.S.

The space in question was previously being eyed by restaurateur Danny Meyer as a possible location for Meyer’s own food hall, according to the New York Post, which first reported the news of the Andrés-helmed concept.

Asking rent, length of lease and the brokers on the deal were not disclosed. A Related spokeswoman did not return a request for comment.

Andrés joins a collection of high-profile chefs and restaurateurs who are bringing around 25 different restaurants and establishments to Hudson Yards in the coming years, including the likes of Thomas Keller, David Chang, Juan Santa Cruz and Michael Lomonaco.

While the new Spanish-themed food hall will be at 10 Hudson Yards, most of the new food concepts arriving at the Far West Side megadevelopment will be located at the Shops and Restaurants at Hudson Yards—the seven-story, 1 million-square-foot retail center anchored by Neiman Marcus that is slated to open late next year.

Kenneth Himmel, the president and chief executive officer of Related Urban (Related’s mixed-use development division), and celebrity chef Keller have been co-curating the culinary mix at Hudson Yards.

That selection will also include Chang’s newest endeavor, which will occupy 5,000 square feet at the Shops and Restaraunts and will feature a formal dining room as well as a new takeaway concept, according to a Related press release.

“I think [Hudson Yards is] going to have a world-class food program and I’m really honored to be part of that,” the Momofuku restaurateur said in a statement in the press release.


Source: commercial