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Category ArchiveWeWork

Selina Targets LA as Key to US Expansion

Selina, a hybrid hospitality and lifestyle company that has made a name for itself in Latin America, is eyeing California as the next major region where it wants to set up shop.

Billing itself as one part WeWork, one part Burning Man, the platform buys existing hotel properties and, in addition to the usual amenities, like housekeeping and food and beverage services, offers wellness and classes, from foreign language instruction to surfing and lessons (depending on the locale) geared toward, the “digital nomad, family on vacation, adventurous backpacker, or surfer looking for paradise.”

co selina3 Selina Targets LA as Key to US Expansion
Selina bills itself as one-part WeWork. Courtesy of Selina.

“There shouldn’t be a differentiation between one-star, three-star and five-star offerings. Someone coming with a backpack could stay and afford it … [and] somebody that wants to travel for $200 and $300 a night can stay as well and everybody is going to be dressed the same and interact in the common area,” Steven O’Hayon, the head of business development at Selina, told Commercial Observer in an exclusive interview outlining the company’s West Coast plans. “That was the initial vision of the whole model we were building. The goal was to eliminate all the language that a traditional hotel uses and create a product for an entire generation of people that doesn’t really matter what social class they come from, but how they see the world and how they want to live their life.”

For a company focused on such a Kumbaya vision of travel and leisure, its business development plans are extremely Type A. Founded in 2015, Selina currently operates 22 properties in Latin America and the Caribbean and plans on opening around 15 additional ones in the next year. Current locations Panama, Costa Rica, Colombia, Guatemala, Nicaragua, Ecuador and Mexico and range from the urban setting of Mexico City to the rainforests of Costa Rica. Each Selina property has between 150 and 500 beds, with nightly prices ranging from $100 to $500.

By 2020, Selina hopes to have over 54,000 operating beds across the world and has set its sights on the U.S. and Europe for ongoing expansion efforts.

coselinasteven Selina Targets LA as Key to US Expansion
“There shouldn’t be a differentiation between one-star, three-star and five-star offerings,” says Steve O’Hayon. Courtesy of Selina.

Selina will open its first U.S. property at the historic Tower Hotel in Little Havana in Miami this September. As the Miami Herald reported last week, it will be the area’s first boutique hotel. The Barlington Group, which owns several properties in the neighborhood, partnered with Selina in order to redevelop the property to appeal to the public’s growing desire for experiential travel as well as social connection—not of the digital kind—by becoming part of the Selina “tribe.”

The variations within Los Angeles and the Golden State are a major draw for Selina, which is headquartered in Manhattan. Currently scouting locations in hipster-haven Silverlake, quirky Venice, urbane West Hollywood and Downtown Los Angeles, Selina is aiming to open four or five locations in the metropolitan area. Further down the road? Expansion into diverse regions the state is known for, from the deserts of Joshua Tree to winegrowing regions up the coast.

“We see California as being the most supportive market for us in the U.S.,” O’Hayon said. In the next five years, its goal is to have “8,000 to 10,000 beds in the state.”

“L.A. has become our base for that, so we are initially scouting locations in L.A. to build up a strong presence and conjoining everything together,” he said. “We can have a surf experience in Venice, and a really cool creative experience in L.A. and then in San Francisco something different.”

Source: commercial

Shared Office Provider Jay Suites Takes 90K-SF Sublease Near WeWork’s New HQ

Jay Suites, a shared office provider, has signed a 90,000-square-foot sublease for the entire 12-story building at 15 West 38th Street from sublandlord Hudson’s Bay Company for its eighth and largest location, according to a press release from Jay Suites.

The company will build a 22,000-square-foot conference center in part of the first floor and the entire second and third floors of the building between Fifth and Madison Avenues. And its first-ever branded Jay Café will be in roughly 600 square feet on the ground floor. Floors four through 12 will be 150 private offices.

The location will also have a rooftop terrace and Jay Suites is planning to relocate its headquarters with 25 employees to the building’s penthouse from its current offices at 369 Lexington Avenue between East 40th and East 41st Streets, where it launched its corporate offices and its first location in 2009.

Jay Suites’ new location is expected to open in the summer.

The tower is owned by Rosen Group. Hudson’s Bay—the parent of various brands such as Lord & Taylor and Saks Fifth Avenue—has 17 years left on its triple-net lease for the property. It was the Canadian company’s U.S. headquarters. Hudson’s Bay relocated to Brookfield Place after signing a lease there in 2014.

Sean Black of BLACKre represented Jay Suites in the deal while Cushman & Wakefield’s Laura Pomerantz and Maria Travlos handled the deal for Hudson’s Bay.

“This deal—with its below-market rent, location and footprint—will let Jay Suites offer its core private luxury office spaces with a full suite of amenities as well as flexible larger team and conference rooms to New York City companies for excellent value,” Jack Srour, the co-founder and COO of Jay Suites, said in a prepared statement. “The deal also benefits Hudson’s Bay Company as its need for underutilized space shifts.”

The asking rent was $45 per square foot, according to The Real Deal. The New York Post was the first to report on the news.

Going to 15 West 38th Street puts Jay Suites in a direct competition with rival WeWork. Nearby is the Lord & Taylor building at 424 Fifth Avenue, which WeWork and Rhône Capital purchased for $850 million last year, as Commercial Observer previously reported. The coworking giant plans to open a new share office location and its headquarters in 424 Fifth Avenue.

Jay Suites plans to spend $10 million to renovate the red terra cotta structure at 15 West 38th Street that was erected in 1909. Jay Suites will upgrade and modernize the technology, infrastructure, work, conference space and rooftop building.

Jay Suites has seven active locations all in New York City and 90 percent are occupied. It expects to have 5,000 members, factoring in the new eighth location. It’s previous largest shared office was at 1441 Broadway, where it leased 75,000 square feet.

A spokesman for C&W declined to comment.

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

Flexible Office Provider NYC Office Suites Inks Two Deals in Midtown

NYC Office Suites, which provides flexible office space, has signed a lease for 40,000 square feet in Rockefeller Center and a sublease for 30,000 square feet in the Citigroup Center, Commercial Observer has learned.

The larger of the two deals is in Tishman Speyer’s 1270 Avenue of the Americas between West 50th and West 51st Streets, with the company taking the entire seventh and eighth floors.

Avital Shimshowitz, the senior vice president of sales and marketing for NYC Office Suites, told CO that the company liked the building for a number of reasons: its location, it neighbors the entrance to Radio City Music Hall, Tishman’s Zo amenity package, the fact that the Rainbow Room is tenants-only for breakfast and lunch, it’s on top of a transportation hub and is along what she called “corporation row.”

On the eighth floor, NYC Office Suites will be converting a corner conference room into a business lounge and it will have a door to an outdoor furnished terrace for clients.

The lease is for 15 years and the asking rent was in the low $70s per square foot, Shimshowitz said.

Sean Black, the founder of BLACKre, represented NYC Office Suites in the deal. He wasn’t immediately reachable. It wasn’t clear who represented Tishman as a spokesman didn’t respond to a request for comment. 

601 lexington avenue photo costar group Flexible Office Provider NYC Office Suites Inks Two Deals in Midtown
601 Lexington Avenue. Photo: CoStar Group

NYC Office Suites clients will start moving into 1270 Avenue of the Americas on April 2, Shimshowitz said. Other tenants at the 31-story 528,900-square-foot office tower include Premiere Networks, Venable and FTSE Americas.

Crain’s New York Business was the first to report on this deal.

In the smaller deal, NYC Office Suites—which caters to mid-career professionals and “falls between Regus and WeWork,” Shimshowitz said—has taken 30,000 square feet in the Citigroup Center at 601 Lexington Avenue at East 53rd Street via a sublease with Citibank. The space is on the 20th floor.

“Our clients base—the core of it is financial services, legal and executive search firms,” Shimshowitz said, so the Citigroup Center was a logical choice for an outpost. In addition the Citigroup Center is in a good location for commuting and offers great views, she added.

Shimshowitz declined to cite the asking rent in the sublease, but CoStar Group indicates building asking rents range from $50 to $100 per square foot. The sublease is for less than 10 years.

Louis Buffalino of Cushman & Wakefield represented NYC Office Suites in the Citigroup Center deal. A spokesman for C&W didn’t immediately respond to a request for comment. It wasn’t clear who represented Citibank in the deal. Boston Properties owns the 59-story, 1.4-million-square-foot building where tenants include Kirkland & Ellis, the Blackstone Group and Citadel Investment Group.

While that NYC Office Suites space isn’t ready in Citigroup Center, “people wanted to move in,” Shimshowitz said, so the first client will set up shop next Thursday.

Thirty-year-old NYC Office Suites has four operating New York City locations—one each at Greybar Building at 420 Lexington Avenue, the Commerce Building at 708 Third Avenue, 733 Third Avenue and 1350 Avenue of Americas, with the last one being the company’s largest outfit at 75,000 square feet.

Source: commercial

In Cannes for MIPIM, Brookfield’s Ric Clark Is All NYC

Brookfield Property Partners is no doubt one of the most active developers in New York City.

The firm recently completed the redevelopment of its 8.5-million-square-foot Brookfield Place office and retail complex in Lower Manhattan, a $250 million project it commenced in 2015. Today the property is nearly entirely leased. And the developer is building at an aggressive pace the more than 7-million-square-foot Manhattan West project.

The company is also is a partner on Park Tower Group’s 22-acre Greenpoint Landing mixed-use development in Greenpoint, Brooklyn. And on top of that, the developer recently picked up the leasehold of the HBO Building at 1100 Avenue of the Americas along with Swig Company and signed most of the space to Bank of America (386,000 square feet). In addition, Brookfield and Swig recently signed Bank of America to a 127,000-square-foot space at their adjacent property, the Grace Building at 1114 Avenue of the Americas.

Commercial Observer caught up with Ric Clark, the senior managing partner and the chairman of Brookfield, while in Cannes for his very first MIPIM (or Marché International des Professionnels d’Immobilier). His main order of business at the conference: talking about trends in the United States on a U.S. panel co-organized by CO.

But we got to talk to him about the status of the firm’s projects, Brookfield’s investment in on-demand conference space provider Convene and the company’s recent—so far unsuccessful—attempts to acquire General Growth Properties, Forest City Realty Trust and Regus parent company IWG.

Commercial Observer: You have a lot of things going on in New York City. What is the status of Greenpoint Landing, Brookfield’s foray into the outer boroughs?

So the first building opens up in August. I think it’s just shy of 400 units. The second tower will open in 2020 and we hope that we have two more towers coming up on the heels of those.

Park Tower Group brought Brookfield in to do that project. What attracted you to it?

It really started with a desire to expand our presence in the multifamily business. Up until roughly six years ago we really didn’t have any investments in the apartment sector. But looking back it’s been one of the best performing sectors, particularly in New York City—vacancy is very low—tenants tend to stay for a couple of years, and when they do leave the capital expenses are pretty modest unlike an office tenant. Granted stay longer, but when they leave it is a major capital reinvestment to retenant the space. So the first building that we built was The Eugene [with 844 units] at Manhattan West. We are closing in on 80 percent leased now, and it hasn’t even been open [for a year]. So basically on the heels of that and making a decision to enter the multifamily space, we looked around and thought, Brooklyn was a great alternative to Manhattan. It’s cheaper, so more affordable, and there is a lot happening in Brooklyn.

What’s going on at Manhattan West?

So 5 Manhattan West, formerly  known as 450 West 33rd Street, started as an apparel warehouse—at one point it had the Sky Rink—we were able to convert that and put a new facade, new lobby, new systems and take what was once the ugliest building in Manhattan and make it into a pretty attractive building, which is appealing to those in the innovation and technology businesses. So that [1.7-million-square-foot] building is effectively fully leased at this point.  

One Manhattan West is going up. We did 1.8 million square feet of leasing [at Manhattan West] last year so overall between 5 Manhattan West, 1 Manhattan West and The Lofts building, which is a 200,000-square-foot building that we are repurposing there as well, we are 92.3 percent leased across the project. So we had a really big year there last year.

What else did you do there?

We are about to break ground on a [30-story, 164-room] hotel. We haven’t yet announced the operator. But we hope too soon. So the remaining piece is to lease out the retail. We have signed a couple of retail deals already—like Whole Foods

So the only thing left is 2 Manhattan West—the south tower—where we are actively pursuing tenants. We have started the below-grade work [on that building].

With everything happening in Hudson Yards District, is Midtown East dead?

Between us and Hudson Yards there has been a lot of momentum over there in the last couple of years. [But] the east is not finished yet. There is a bit of a nuclear arms race going on when it comes to upgrading buildings that are somewhat obsolete [in Midtown East]. I think it’ll make those buildings more appealing. Those that don’t spend the capital to reposition their buildings and enhance them, I think are going to struggle a lit bit. But the east is not dead. We just saw the J.P. Morgan announcement [to build new Park Avenue headquarters], which was pretty huge for Park Avenue.  

It’s not exactly Midtown East, but your company now has two buildings off Bryant Park with the Grace Building and the recently acquired neighboring 1100 Avenue of the Americas. Why did you want the adjacent property?

Adjacent and back connected to the Grace Building is the HBO Building, 1100 Avenue of the Americas. There is literally a floor where you could walk from one building to the other.

Interestingly, someone along the chain of ownership built what I’m going to call a “spite wall” on the back of the HBO Building. So when we acquired the Grace Building there was this solid wall that went literally up the north side of the HBO Building.

We were the only one’s pursuing the acquisition of 1100 Avenue of the Americas that could remove that wall [since we also owned the Grace Building], and basically connect the Grace Building plaza to Bryant Park with a renovation of the lobby. The other advantage that we had on that building [1100 Avenue of the Americas] than others is that the building does not have a loading dock. So you literally had to pull a truck up in the middle of the night and offload it to bring goods into the building. We can connect the building to the Grace Building’s loading dock underground.

We saw this as an opportunity to help Bank of America [which is the anchor of 1 Bryant Park] create an urban campus. So they leased the bulk of 1100 [Avenue of the Americas], and also have taken some space in the Grace Building as well.

How is Brookfield Place doing?

So we’ve leased up all of the retail space and the project is 8.5 million square feet and 95 percent leased [in both office and retail]. And I just looked at the [2017] year-end sales numbers before I came here and it had very strong same-store sales.

It really has exceeded our expectations. You can go there on a Friday night, it’ll be crowded. You could go there on a Saturday morning, it’ll be crowded. And it’s a difference; the crowd takes on a different complexion on any day of the week. Sunday morning you’ll see a bunch of dads and strollers. And we are really proud of it.

We’ve heard millennials are to blame for the death of malls. How is Brookfield preparing for the influx of millennials that will reshape the economy?

In a year or two, millennials will make up 50 percent of the world’s working population. And by 2030, it’ll make up 70 percent. So for sure, I think those in the real estate business that are paying attention to that are making adjustments to their real estate to help employees attract, maintain and motivate employees will be more successful.

This crowd was basically born with a smartphone in their hands. And they want everything immediately and they want it efficiently, so we’ve been bringing a lot of innovation and technology to our “places.”

What specifically?

For example, at Brookfield Place we are beta testing an app that will package a bunch of other apps that will provide convenience to those that work within our project. You will soon be able to get in and out of the building by using your smartphone instead of a plastic badge. You will receive security alerts on a moment’s notice if there is some kind of terrorism event or some kind of emergency.

We noticed that when we opened Hudson Eats [in Brookfield Place], between the lunch hours the lines were so long that people were actually turning away. So we found an app called Ritual, with which you can sit at your desk, decide where you want to order your food from, you order your food, the food is prepared, they give you a notice when it is ready. They’ll also let you know if someone else on your floor or in your building is going down to pick up food from there and [inform you if] they’ll bring the food back to you.

Within a couple of months 25 percent of the people that work within Brookfield Place downloaded this app, and sales for the stores that use it went up 25 percent as well. So we are trying to wrap all of those with a Brookfield app just to make the overall experience just as seamless and efficient as we can.

And this is only for Brookfield Place?

We’ve been beta testing this whole thing at Brookfield Place so once we get the bugs out and its working efficiently, we’ll roll it out across the world.

How did you get to know Convene and why is Brookfield so heavily investing in it?

I got a phone call once from a CEO of [Hudson’s Bay Company]—one of our tenants—after we signed a lease with him, saying, “I’m sitting here with my architect and I’m planning my space and I’m planning a boardroom, which I am literally going to use once a quarter. And if you had something where I could rent a catered conference room once a quarter, I could use my space that I rented from you for more productive things.”

And he introduced us to Convene. And we understood the merits of it immediately.

On the one hand, I’m sure our leasing group would rather rent more space to somebody even if it is sitting idle, but I think those that listen to their tenants and solve their tenants’ problems as they relate to efficiency will be more successful.

How much has Brookfield invested in Convene?

We are the largest shareholder now. We sign leases with them in some of our buildings and we do management agreements with them as well. So we think wherever we can work a Convene into our projects it’s a great amenity—one that tenants will respond positively to.

Work space as a service has become huge business with players like WeWork, IWG (Regus) and Convene. Are you afraid that they will take business from traditional landlords?

So for our office business primarily we are in the big-bulk leasing business. So we don’t have a lot of small tenants in our facilities… And for sure the smaller tenants I think—particularly those in a start-up business—need flexibility and I think WeWork or IWG provides that flexibility for those tenants that don’t want to sign a 10-year lease because their business may be very different in a couple of years. I think there is room for both of these. And we are working with a coworking or flexible angle within many of our projects around the world.

Although they have been unsuccessful so far, why has Brookfield made moves to acquire GGP, Forest City Realty and IWG?

So I can’t comment on specific transactions. But I would say [Brookfield Property Partners parent company] Brookfield Asset Management’s real estate business has about $150 billion of assets under management and we got to that scale through [mergers and acquisitions] activity. So we are always looking for mispriced or undervalued opportunities—opportunities where we think either through a better capital structure or because of our operating capabilities or some idea that we have or some synergies with some or our other businesses, we can acquire a business and create value. And I’d say, in all of those transactions that is what we are really focused on. As for the specific ones that you mentioned, we will see.

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

WeWork Inks 177K-SF Deal for New Chelsea Location Near Its HQ

WeWork, the Chelsea-based coworking giant, has signed a roughly 177,000-square-foot lease for a new location at 18 West 18th Street a block from its current headquarters, Commercial Observer has learned.

The company will occupy the entire office portion of the 11-story building between Avenue of the Americas and Fifth Avenue. WeWork will open the location in stages, with the first encompassing the fifth through 11th floors, or approximately 117,000 square feet, this summer, according to information provided by the landlord’s broker, Cushman & Wakefield.

Then it will occupy about 50,000 square feet in the second through fourth floors. Those floors are currently occupied by the Association for Autistic Children, and WeWork will assume the space in a few years, according to C&W’s David E. Green.

“The property is a classic Chelsea loft building with great light and air,” Green, an executive director at C&W, told CO.

Green and colleagues Tara Stacom and Connor Daugstrap handled the deal for 17-18 Management Company LLC, owned by a partnership led by the Schaffer family.

CBRE’s Derrick Ades, Timothy Dempsey and Brett Shannon represented WeWork in the transaction. They declined to comment via a spokeswoman.

Green declined to provide the terms of the deal, and a spokesman for WeWork did not immediately return a request for comment.

WeWork’s current headquarters is located at 115 West 18th Street between Avenue of the Americas and Seventh Avenue. But, the company plans to move its corporate offices to the Lord & Taylor building at 424 Fifth Avenue between West 38th and West 39th Streets. In a joint venture with Rhône Capital, WeWork announced last October a deal to purchase the 676,000-square-foot building from the store’s parent company Hudson’s Bay Company for $850 million, as CO previously reported.

Source: commercial

Industrious Raises $80M in Funding Co-Led by Fifth Wall, Riverwood

Rapidly growing Brooklyn-based flexible workspace provider Industrious, which has attracted members from Hyatt, Instacart, Chipotle, Fullscreen, Mashable and Pivotal, is about to get even bigger.

After tripling the number of its locations in the U.S. to 35 over the past three years, Industrious has completed its latest fundraising round and pulled in $80 million in Series C funding co-led by Los Angeles-based Fifth Wall Ventures and Riverwood Capital, according to an Industrious news release today.

The company has now raised a total of $142 million since its founding in 2013, according to a spokeswoman. It plans to further its expansion by adding about 30 more locations this year. Also Industrious is projecting its revenue growth will triple this year, according to Jamie Hodari, a co-founder and the CEO of Industrious. He also said that in 2018, the company plans to launch an app that will help connect tenants to events. He declined to go into further detail about the product.

“Our network is growing very quickly and that is a capital intensive proposition,” Hodari told Commercial Observer. “We have to be able to serve our customers where they are, wherever that is across the country.”

img 0036 Industrious Raises $80M in Funding Co Led by Fifth Wall, Riverwood
Industrious plans to open many new locations around the country this year. Photo: Industrious

Other investors in the funding round include Alrai Capital, Outlook Ventures, Rabina Properties, Schechter Private Capital and Wells Fargo Strategic Capital, the release indicates.  

Fifth Wall, a venture capital firm that invests in burgeoning real estate companies, is backed by major property owners such as Hines, mall-operator Macerich, Prologis and Rudin Management Company. (Industrious is not the first coworking provider that Fifth Wall has invested in, but it is the first that has been publicly announced.) It has already invested in VTS, Appear Here, WiredScore and Enertiv, as CO reported first in January.

The company chose to invest in Industrious because of its ability to attract Fortune 500 companies to its model.

Industrious does not create flashy spaces designed with startups in mind, but implements sophisticated designs with actual offices—and a handful of coworking desks—at its locations.

“It’s an elegant, simple, refined aesthetic that attracts large companies,” said Brendan Wallace, Fifth Wall’s co-founder and managing partner.

Wallace added that Fifth Wall also selected Industrious because he believes the office space provider partners more with landlords than do its competitors, based on the structure of the lease agreements it signs.

The Fifth Wall co-founder declined to elaborate, but said Industrious is different than say a WeWork, which signs a lease and then fills its spaces with members whose collective fees work out to much more than the price of the original lease. In WeWork’s case, the coworking giant receives more upside than the landlord does for the space. (A spokesman for WeWork declined to comment.)

“I think that landlords have grown increasingly cautious to coworking players, including WeWork,” Wallace said. “What [Fifth Wall’s investors] were looking for was a coworking partner to deploy across their national footprint.”

Source: commercial

Manhattan Is Tops for Coworking Space, LA Ranks Second: Report

Coworking represents a small yet growing segment of the office market, a new study demonstrates, with Manhattan dominating.

Manhattan has 245 coworking spaces equaling 7.7 million square feet, according to a new study by Yardi Matrix,  a commercial real estate research and data platform. Los Angeles came in second with 3.7 million square feet in 158 locations. Nine other metros studied have at least 1 million square feet of coworking office product, with Miami being home to the most coworking space as a percentage of total stock, at 2.7 percent of the metro’s 50.5 million square feet of space. Manhattan took second at 1.7 percent of total product dedicated to shared space. (Los Angeles ranked third along with West Palm Beach, with 1.6 percent of space dedicated to coworking.)

Yardi quantified coworking locations in 20 of the U.S.’ largest markets encompassing buildings of 50,000 square feet in major cities and large regions. The research found companies offering memberships at 1,166 coworking sites with 26.9 million square feet of space, which represented 1.2 percent of office space in the 20 markets studied. Furthermore, 11 of the 20 locations studied have more than 1 million square feet of coworking space for lease. There is no comparative data available, as Yardi said this is the first study to “quantify the amount of square footage of coworking space in relation to total office space within markets.”

Perhaps, unsurprisingly, coworking has proliferated more in cities—which have a critical mass of workers—with leases encompassing 1.4 percent of urban office versus 0.9 percent of suburban office space, according to Yardi.

Although there are numerous companies offering coworking space for lease, the field is dominated by Regus (9.4 million square feet)—which pioneered the “workspace as a service” concept in the 1990s, first in Europe and later in the Americas—and WeWork (6.5 million square feet). The two industry giants account for nearly 60 percent of all coworking space in the 20 markets studied.

“Demand is high in markets with concentrations of knowledge workers—especially IT but also new media or industries such as biotechnology and telecommunications—that are friendly to startups [and] in metros where space is at a premium,” the report says, and lower in cities such as Dallas and Houston that have modest barriers to construction and high vacancy rates. Markets with lower vacancy rates, where office space is at a premium, have a higher concentration of coworking space. Fewer blocks of space exist in large coastal markets studied, such as Manhattan, San Francisco and Los Angeles, which, subsequently, have led to a larger percentage of coworking space.

That’s certainly been the case in Los Angeles, where an increasing number of new media providers including Amazon and Netflix have set up shop around town.

According to stats from Cushman & Wakefield’s fourth-quarter 2017 Greater Los Angeles Office market report, coworking companies WeWork and Spaces currently span multiple submarkets and have signed leases totaling more than 220,000 square feet in Hollywood, the Financial District and Culver City.

Source: commercial

REBNY 2018: Thrills and Frills

changing of the guard is a good moment for reflection. Last June, it was announced that Rob Speyer would be stepping down as chairman of the Real Estate Board of New York and be replaced by Bill Rudin.

Speyer got the job in 2013, five years and a bizarro world ago; and that crack isn’t strictly about the national political scene.

New York City is a different place than it was under the beginning of the Speyer regime. Michael Bloomberg was mayor. Steven Spinola was the long-serving president of REBNY. Sheldon Silver was the Speaker of the New York State Assembly. Nobody had heard of WeWork.

Different, right?

We spoke with Rudin and asked what his plans were for the organization.

Liam La Guerre looks at the various milestones in the Speyer presidency, from tapping John Banks to become Spinola’s replacement, to helping steer the city into the next incarnation of its 421a program, Affordable New York.

Speaking of Affordable New York, it has been one of the things that the 122-year-old trade organization has lobbied most fiercely for, and now that a year has passed since the new legislation has been signed into law, Aaron Short explores how the program has been panning out.

Of course, REBNY is not an organization that is strictly defined by the laws it advocates. It is also a presence in the courtroom. Lauren Elkies Schram examines the six legal cases that the trade organization has lent its legal expertise to over the last year.

One of REBNY’s big victories of last year was the fact that the City Council tore up the commercial rent tax for businesses whose rents are less than $500,000 per year, which Matt Grossman reports on.

An organization like REBNY will no doubt  be facing unforeseen questions and problems including a booming population and a razor thin vacancy rate; so if they’ll pardon a little persnickety advice on our part, Rebecca Baird-Remba examines at the issues that will be on the horizon.

Baird-Remba also got a look at the board’s annual report, the highlights of which we reported here.

Of course, not everybody is in love with the board. Rey Mashayekhi looked at its most persistent critic, labor advocate Ray Rogers.

REBNY, and the industry it champions is all about data. Mashayekhi found out where, physically, the old archived data is being housed (LaGuardia Community College, as it turns out).

Finally, our yearly REBNY issue also delves into who is being honored this year and why. The honorees at this year’s banquet include Rudin Management’s Gene Boniberger; Richard LeFrak; Cushman & Wakefield’s Ron Lo Russo; C&W’s Joanne Podell; U.S. Senator Charles Schumer; outgoing president Speyer; and Stribling & Associates’ Elizabeth Stribling.

—Max Gross

Source: commercial