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Ad Agency Momentum Worldwide Heads to 60K SF at Brookfield Place

Ad agency Momentum Worldwide is packing up its Hudson Square offices and heading Downtown to Brookfield Place.

The Interpublic Group subsidiary has signed on for 60,000 square feet via a 10-year lease at Brookfield Property Partners300 Vesey Street, The Real Deal reported. Momentum’s new home includes the entire top floor of the 15-story building, part of the 14th floor and a private roof deck. Asking rent in the deal wasn’t immediately available.

JLL’s Scott Panzer, Robert Romano and Shannon Rzeznikiewicz represented Momentum in the deal, and it’s unclear who handled the transaction for Brookfield. Neither company’s spokesman responded to a request for comment.

Momentum will decamp its current space on the second and third floors of Jack Resnick & Sons250 Hudson Street for Brookfield Place in May 2018, according to information from CoStar Group.

In recent years, the marketing company, which has 2,000 employees and 40 offices, has run campaigns for American Express, Chevron, Microsoft, Coca-Cola, SAP and Verizon, as well as many other high-profile clients.

Other tenants in the 522,000-square-foot, 21-year-old building include CME Group, Pell Brothers Trading, Smith & Moore and KCG Holdings, CoStar indicates.

Source: commercial

What’s Happening With Chinese Investment in New York City Commercial Real Estate?

There was a lot of nail-biting from the New York real estate community heading into this year after hearing that the biggest whale in terms of investment might not be allowed to swim in our waters. We’re talking, of course, about China.

With China’s capital controls in place, the country was expected to tamp down outbound investment in 2017. While the number of New York City investment sales deals involving the country has dwindled significantly this year, China still represents the biggest cross-border player, according to Cushman & Wakefield.

Chinese investments dropped to 16 percent, or six, of the 38 foreign capital deals (excluding debt deals) in New York City in the first three quarters of the year, versus 28 percent, or 16, of 58 acquisitions at the same time last year, C&W data indicates.

Francis Greenburger, the chairman and chief executive officer of Time Equities, explained the issue in Commercial Observer’s survey for this year’s Owners Magazine: “Although there are exceptions, Chinese investors are subject to government restraints in arranging to transfer funds out of China. This has caused a reduction in transactions by one of the most active group of New York City buyers.”

But in terms of dollar volume the dip in Chinese investment in New York City hasn’t been dramatic, and the country still has spent more than its competitors. Chinese investments made up 11 percent of the $24.51 billion spent on commercial real estate in New York City this year through September compared with last year’s 13 percent of $45.87 billion.

Despite a slowdown in deal flow and a reduction in investment sums, the Chinese have been going for big deals in New York City.

“Starting in 2016 through the first half of 2017, China surpassed Canada as the largest foreign investor in New York City,” said investment sales broker Douglas Harmon of C&W. “Capital controls caused Chinese buyers to participate in less transactions, but the capital was consolidated into the larger deals.”

Harmon and colleague Adam Spies are representing SL Green Realty Corp. in the sale of a 49 percent stake in a 54-story office tower at 1515 Broadway between West 44th and West 45th Streets to China Investment Corporation (CIC), a Chinese sovereign wealth fund. It is a property valued at $2 billion. A spokesman for SL Green said the deal has not closed.

In the priciest foreign property acquisition of the 12 months ending in October, Chinese conglomerate HNA Group paid $2.21 billion for 245 Park Avenue between East 46th and East 47th Streets. The sellers were Canada-based Brookfield Property Partners and the New York State Teachers’ Retirement System. The deal represents one of the highest prices ever paid for a Manhattan office property. (HNA also bought a mansion at 19-21 East 64th Street for $79.5 million this year.)

At the end of last year, CIC bought a 45 percent interest in the former McGraw-Hill Building at 1221 Avenue of the Americas between West 48th and West 49th Streets from Canada Pension Plan Investment Board. The property was valued at $2.29 billion.

Two other large Chinese acquisitions in the last year include WanXin Media’s $68 million buy of an office building and vacant lot at 7-15 West 44th Street and office developer Soho China picking up the landmarked John Pierce Residence at 11 East 51st Street for $30 million.

Alex Foshay, a senior managing director in Newmark Knight Frank’s capital markets division, said the Chinese government’s restrictions have “really strangled all major investment out of mainland China.”

Foshay cited as an example, China’s Anbang Insurance Group’s pulling out of an investment in 666 Fifth Avenue. Kushner Companies was planning to redevelop its flagship New York office tower with Anbang but talks terminated in March.

Terrence Oved, the head of the real estate department and a partner in the law firm Oved & Oved, said he has seen the drop off in acquisitions generally, and those that are closing are taking longer to complete.

“That rapid-fire tennis-match-like quality that we saw in 2016 [between players] is glaringly absent in the foreign transactions in 2017,” Oved said. “The perception of foreign money is that New York is in the later stage of the cycle.”

Also, Oved said, New York City is facing global competition from other world cities that weren’t as competitive the last few years. He pointed to Silicon Valley’s appeal to the tech company likes of Amazon, Facebook and Microsoft.

HFF’s Andrew Scandalios said that deal flow is down this year because properties are overpriced.

“Buyers are less enthusiastic to pay 2015 prices, and the sellers aren’t going to move [them],” he said. “We haven’t seen the offshore capital abate. It’s just they’re waiting for better pricing opportunities.”

Scandalios worked on the deal in which Singaporean sovereign wealth fund GIC picked up a 95 percent stake in the 50-story office tower at 60 Wall Street from Paramount Group and Morgan Stanley with a $1.1 billion valuation. (He also helped secure GIC’s $550 million acquisition loan from German bank Aareal Capital.)

In the summer, Germany-headquartered Allianz SE contributed the 18-story, 352,000-square-foot office building at 114 Fifth Avenue (which it acquired in 2015 with L&L Holding Company) into a then-new joint venture with Columbia Property Trust to buy and manage U.S. trophy properties. Columbia contributed a Palo Alto and San Francisco property to the venture. The three properties were valued at $1.3 billion and HFF negotiated the deal.

Commercial real estate deal volume is down this year for all foreign buyers in New York City as of the third quarter to 28 percent of all investment sales, C&W found, from 34 percent a year prior. (A look at foreign investment in New York City is limited to investment sales deals because debt and equity transactions are harder to track.) The findings parallel the nationwide trend. As of mid-2017, foreign investors represented 13 percent of all U.S. transactions by volume versus 16 at the same point in 2016, Real Capital Analytics data indicate.

Foshay said that a number of overseas buyers are “skeptical” about plunking down large sums of money (over $150 million) in the U.S., out of concern about “where we are in the cycle.”

This doesn’t mean, of course, that foreign investors aren’t seeking out deals nationwide. And Canada heads the procession.

Canada has sealed 255 U.S. commercial real estate acquisitions in the last year, followed relatively closely by China with 215 before dropping off significantly with Singapore and its 36 deals, RCA data show.

In the last year, Canadian entities have closed some notable purchases in New York City. Oxford contributed $65 million in a $130 million deal for 427 10th Avenue and Brookfield Property Partners input $185 million of $370 million for 1100 Avenue of the Americas. In addition, Canadian pension fund Ivanhoé Cambridge and Chicago-based Callahan Capital Properties paid $652 million for Goldman Sachs’ former headquarters at 85 Broad Street (Ivanhoé Cambridge invested $326 million in the deal).

Finally, Canada-based Oxford Properties Group is in the process of purchasing the St. John’s Terminal site at 550 Washington Street from Westbrook Partners and Atlas Capital for $700 million.

In New York City specifically, foreign investment has been dropping because of a dearth of trophy property on the market, according to a couple of brokers.

“There just wasn’t as much property available this year as there was last year,” said CBRE’s William Shanahan, who along with CBRE’s Darcy Stacom brokered the 245 Park Avenue deal.

The duo also sold the 31-story office building at 685 Third Avenue for TH Real Estate and Australian sovereign wealth fund the Future Fund, to Japanese real estate firm Unizo Holdings for $467.5 million.

Foshay concurred about the lack of inventory.

“I would say there has been a lack of trophy product to be purchased,” he said, but “there’s been quite a lot of availability in investment sales of non-trophy assets, meaning Class B product, and it is that trophy investment product that particularly appeals to overseas investors.”

Going forward, Shanahan expects to see “more participation” from Japanese investors.

Harmon said, “We think Chinese investment should pick back up in the first quarter of 2018. Additionally, South Korea, Japan, Norway, Saudi Arabia and Canada make for plenty of competition for domestic investors in 2018.”

Source: commercial

Why Big Data Companies Are Building Server Farms in Middle America

When Apple Inc. picked a Des Moines, Iowa, suburb for its next high-end data center over the summer, only its sixth in the U.S., it wasn’t playing its typical tech-industry-pioneer role. It was following Google, Microsoft and Facebook, all of which have already planted data-center flags in the Hawkeye state.

It’s somewhat surprising, but rapidly getting less so, to see technology giants of Silicon Valley or Seattle turning from industry power hubs on the coasts to second-tier markets to establish new data centers. States like Iowa, Ohio, Nevada and North Carolina have steadily built their infrastructure and business cases, and industry watchers say they have gained momentum amid surging demand for digital storage space and shifting corporate data management trends that might just blow the barn doors off.

Many factors contribute to the wider geographic play, but big data center operators such as Amazon, IBM, Google and SalesForce are hungry for core ingredients of land, power and water, which can be plentiful and cheaper off the coasts, according to Sean Brady, a managing director and co-founder of the global data center advisory group at Cushman & Wakefield.

“They’re going to go for a campus,” Brady said. “They’re typically going to buy a tract of land and build it.”

The main players are tech or software companies adding capacity for their own storage needs, such as Apple and Facebook; cloud computing giants and co-location providers running data for others, like IBM’s SoftLayer and Microsoft’s Azure; and some—Amazon, for one—operating in multiple camps. While today’s push has a cloud-computing flavor, the whole market is hot, Brady said.

“The cloud providers are going into these remote areas and taking down 100-acre tracts of land and 100 megawatts of power,” he said. “The appetite for data is going to absolutely grow exponentially.”

That’s keeping real estate, design and construction firms very busy, said Ben Kaplan, a vice president at Turner Construction in its data center division.

“The scale of what we’re building is unprecedented,” he said.

Go East, or West

The heart of data-center country remains on the coasts with the Washington, D.C., and Northern Virginia region still a key hub, thanks to an established co-location industry, and core pockets around Silicon Valley and New York, said Mason Mularoni, a senior research analyst in the professional development industries unit at JLL. Dallas and Chicago are also major markets.

“They still are major contenders—a lot of those are operating on very slim vacancies,” Mularoni said. “But other traditionally midtier markets have made some big expansions forward.”

Iowa’s ascendance started a decade ago when Google made plans to build a huge complex in Council Bluffs, Iowa, in the western part of the state, right around the time state officials introduced tax and business incentives similar to what manufacturing firms had long received, according to Tina Hoffman, the marketing director at the Iowa Economic Development Authority. The state also aided in the development of an advanced fiber cable network, which has helped spark data center projects in the Des Moines area, and even touts itself as a haven from hurricanes or earthquakes, she added.

“We do also have affordable electricity and available water, and we lead the nation in renewable energy access, which was significant for Facebook and Apple,” Hoffman said.

Those seeds bore fruit in billion-dollar complexes for Google and Microsoft, and now Apple is next with plans for a new $1.3 billion 2,000-acre campus in Waukee, Iowa, on which it is starting with two 400,000-square-foot data centers to serve domestic users of its Siri service, its App Store and more. Construction and land account for more than half of the current budget with hardware and equipment as most of the rest. The facility—breaking ground next year with the first center online in 2020—will run on 100 percent renewable energy.

Apple’s facility will have “the latest and greatest in terms of various technologies, especially around energy and efficiency,” said Rachel Wolf Tulley, an Apple spokeswoman. It is getting more than $200 million in incentives from state and local entities.

Ohio is gunning for data center facilities with its own pitch of “safe and central”—free of most natural disasters and a day’s drive to major Midwest and East Coast markets—and a strong fiber network, said Ted Griffith, a managing director for information technology at JobsOhio, a nonprofit economic development group. The state hosts various data centers for non-tech corporations, such as Citibank, won a center for Amazon Web Services in 2014 and recently landed Facebook, which is investing $750 million in a new complex, he said.

“Ohio is in the center, and in terms of access, your speed and distance matters,” Griffith said. “If you are far from the server, there is data latency—[a lag in] the time to travel from point to point.”

The state also has its share of large co-location data providers such as CyrusOne and Cologix that offer services to corporations, which are increasingly outsourcing data management, he added.

Shifting Data Trends

Establishing data centers in remote locations alone is not a new trend: Operators in the past often aimed to hide these massive complexes from potential security threats, Brady said. Today, there are different drivers for the trend, however, as many factors align well with the rising popularity of the less traditional states.

“They’re going to states that have cheap power, that have large tracts of land and access to water for cooling systems,” he said, with rural Oregon and Washington State also competing in such searches. “When you build large data centers and you’re bringing in 25 megawatts or more of power to a particular location; that’s a sunk cost.”

Advanced communications systems, higher data speeds and redundant fiber options are critical pieces today, said Brian Martin, the senior electrical engineer in the mission critical group at design and engineering firm AECOM.

“That is a huge siting consideration—trying to make sure these big center operators have multiple pathways of fiber going in and out, and with redundant rings encircling the entire campus,” Martin said.

Demographic factors also are at play when tech firms look at new markets with higher education centers such as Northern Virginia and Ohio, or younger, more affordable cities such as Denver, offering an edge.

“It’s about the workforce that you need—and is it [in a particular market] and at what price,” said Kenneth McCarthy, a principal economist and senior managing director at Cushman & Wakefield.

Cloud computing’s growth is bolstering the move to nontraditional regions as corporations increasingly shift to outsourcers—pushing these providers to open new data centers either by leasing existing commercial facilities or pursuing development of new complexes, Mularoni said.

“The second-tier markets are picking up that capacity,” he said. “The cloud front has driven a significant amount of the absorption in the U.S. the last 12 months.”

It doesn’t hurt that all states are offering generous incentive packages, according to McCarthy. “It’s definitely part of the entire negotiating process now,” he said.

Another development wave may soon spread even further as the “internet of things”—which controls everything from smart refrigerators to self-driving cars—drives demand for multiple smaller data centers closer to end users that can quickly and accurately process the vast volume of information these technologies need to function safely and properly, Brady said. The demand for such faster, real-time data flow will likely spur development of many smaller centers around population hubs, he said. (See story on self-driving cars on page 24.)

Efficiency Rules

The vast demand for more data-handling capacity doesn’t necessarily mean new construction will be outsized. Data managers don’t want to bet too much on today’s technology, Brady said.

“There has been more change in the technology of data centers in the past five years than there has been in 20,” he said. “We are able to cool a greater amount of heat in a smaller space, and so we’re able to run these things more efficiently.”

Fifteen years ago, data centers brought in two to three kilowatts of power to get one kilowatt out, and now it’s much closer to one to one. “The equipment keeps getting better, the designs get better and costs are coming down across the board,” Kaplan said.

Power generation and cooling system trends move fast as data center operators are always on the hunt for even more energy efficiency and cost savings, said Ben Rasmussen, a senior mechanical engineer in AECOM’s mission critical group. Chiller plants and cooling systems are big capital expenditures, and not having them online all day can significantly reduce power use, he said.

“A lot of the clients we work with…are moving away from chilled water-based cooling solutions to direct evaporative-cooled air-economizing solutions,” Rasmussen said.

Another energy systems trend now gaining attention from data center developers is finding ways to use less uninterruptible battery power for backup needs, said Matt Treat, a vice president for the mission critical and advanced technologies practice at AECOM. “One of the newer technologies that we’re seeing the last two years is natural gas-based emergency power generation,” he said.

Natural gas facility manufacturers have made big advancements in recent years, bringing plant startup times down from 10 minutes in past decades to as little as 40 seconds today, making them a viable source of backup power supply, AECOM’s Martin said.

Systems redundancy also remains a big design focus of data centers—a concept that isn’t new but is getting far more sophisticated in implementation as efforts today aim to build multiple pathways for a utility’s output to flow to and from source and usage points  instead of adding or reducing equipment, Rasmussen said.

In some cases, redundancy simply means a standalone piece of a larger campus separated physically from other facilities to reduce common points of failure, Martin said. There are competing views on how to execute such ideas. Some create fully isolated blocks, and others simply have multiple utility sources connected to multiple facilities but with enough flexibility to dedicate supply to specific zones as needed. And most of the manufacturers of power supply equipment—generators, air handlers and more—now build their systems for redundancy purposes, he added.

With technology evolving quickly, many data center operators are planning new campuses strategically. “Most of the large clients in particular making significant capital investments [are] requesting a phased approach to the facility design and installation,” Treat said.

That will encourage more nimble planning. “The Amazon Web Services and Googles are not going to build a 500,000-square-foot building, but they’re going to build a 100,000- to 200,000-square-foot building,” Brady said. “They know technology is changing—a better mousetrap is in our future.”

Facilities today must also plan for greater physical site security requirements and cybersecurity defenses that use massive routers and switches, Griffith said. Such needs—and fast-growing demand from users for technologies with advanced capabilities—will drive even further high-end design and outsourcing trends.

“It’s not your FitBit anymore” driving on-the-spot data-processing trends, Griffith said. “Entire factories are going to operate or not based on the quality of the sensors gathering data. This whole digital ecosystem is just exploding.”

Source: commercial

‘Twilight’ and ‘Hunger Games’-Themed Attraction Headed for Times Square

Movie studio Lionsgate Entertainment is partnering with Spanish amusement company Parques Reunidos to develop a $30 million attraction in Times Square that highlights several popular films and TV series, including Hunger Games and Twilight.

The 45,000-square-foot Lionsgate Entertainment City will offer 13 exhibits that use virtual reality and other technology to “immerse guests in their favorite Lionsgate film and television stories,” according to a press release from Parques. Exhibits themed around Mad Men, Divergent and Now You See Me are also in the works. The flagship project is the first of several Lionsgate-themed attractions planned throughout the U.S. and Europe. It’s expected to open in 2019.

The Madrid-based leisure park operator signed a 15-year lease for three floors of retail at 11 Times Square, at the corner of West 42nd Street and Eighth Avenue. The New York Post, which broke the news of the deal, pegged the asking rent at $7 million a year.

SJP Properties owns the 1.1-million-square-foot building with PGIM and Norges Bank. E-Trade inked a 31,000-square-foot lease at the 40-story tower earlier this year, Commercial Observer reported, and other major tenants include law firm Proskauer Rose, Microsoft and Bank of America.

RKF’s Robert K. Futterman, Joshua Strauss and Scott Zinovoy represented both sides in the transaction. Spokespeople for RKF did not return a request for comment.

Source: commercial

Robin Fisher Has a Multimillion-Dollar Dream of What to Do With Raw, Unused Space

Source: commercial