Maybe New York was a wee bit glib assuming that (a) we were the center of the universe and everyone wanted to be here; (b) tech companies had dump trucks full of sweet, sweet venture capital cash and (c) those geeks would eventually need office space.
One by one, these assumptions began buckling and collapsing throughout the COVID-19 crisis, as companies like Google and Facebook (signatories of two of the biggest tech deals in New York leasing in the last two years) announced that they would allow employees to work from home until 2021 or, in the case of Twitter, indefinitely.
However, Thursday saw something interesting in terms of what this means re: the city’s real estate. Facebook made the announcement that some of their workers would never return to the office and they were hunting up remote talent. (Uh-oh.) But, Steve Cuozzo reported for Commercial Observer that doesn’t mean that their deal for 740,000 square feet at Vornado’s Farley Post Office is off. In fact, it’s closing imminently. (Yes, yes — we include the disclaimer that until the ink is actually spilled, anything can happen.)
If one of the big mamous of the tech world can simultaneously keep employees at home and recognize that they still have massive office needs, that’s a pretty unambiguous show of faith in New York’s office market.
More good news! (Sort of…)
We get Yankee Stadium back for the summer! Well, in drive-in movie form. While the 2020 baseball season remains in heartbreaking limbo at the moment, MASC Hospitality is transforming the Bronx stadium’s parking lot into a drive-in movie theater and concert venue in July in a program called Uptown Drive-In.
If the lease is up on your apartment, we hate you. No, just kidding! (Kinda.) CO found (no surprise, really) that rents are plummeting and supply is increasing. (Just do yourself a favor and don’t take the first offer.)
The Chrysler Building is getting an observation deck! And Aby Rosen is even talking about bringing back the icon’s Cloud Club on the 66th and 68th floor which closed in the 1970s.
There was even some broker hiring! Industry vets Lev Kimyagarov and Rubin Isak, who did stints together at Massey Knakal and Eastern Consolidated, teamed up for a new business called Development Site Advisors; the firm is a brokerage that focuses exclusively on development sites. Although they hired six people before the crisis, and another six during the crisis, they’re apparently looking to hire four others in June.
And, while this normally wouldn’t qualify as good news, the fact that the L.A. Planning Commission told Onni that the Canadian developer would have to go back to the drawing board and redesign its gigantic Times Mirror Square project in Downtown L.A., it proved that at least some Angelenos are abiding by “business as usual” and a seeming inexplicable faith in a quick market rebound! (Yes, L.A.’s local zoning commissioners don’t seem to believe that the biggest unemployment crisis since the Great Depression is a reason not to put a roadblock in front of a big 1.51-million-square-foot project that Onni will spend hundreds of millions of dollars on. Makes total sense!)
And now the bad news…
At some point, the good juju will have to rub off on retail, right? Because last week the slaughterfest continued.
CO examined all the debt that had been accumulated by retail brands over the past few years and the fact that it’s a ticking time bomb as retailers declare bankruptcy left and right.
Speaking of bankruptcies, JCPenney announced its bankruptcy and store closures. Pier 1 announced that it was going out of business. The Hilton Times Square filed a WARN notice that it was furloughing 152 workers. And another 2.4 million people were added to the unemployment rolls, bringing the total up to 38 million in nine weeks.
Placer.ai began examining the foot traffic of malls in the states where shutdown orders have been lifted and it turns out that consumers are a lot more risk averse than their governors: 79 percent fewer shoppers had returned to the malls.
Finally, last week Hospitality House’s Steve Kamali got on Commercial Observer’s Fourth Annual Retail Panel where he revealed some really, really bad data and predictions: “Twenty percent of tenants that we’ve surveyed have handed back their keys thus far,” Kamali said. “We anticipate over 30 percent, in addition to that, handing back their keys.” Oy. (But, hey, the other panels of the day were sunnier in their outlook. So, that’s something. Right?!)
Yes, companies still need to lease space. Kushner Companies took a 10-year, 20,500-square-foot sublease at the top floor of the GM Building, after ditching 666 Fifth Avenue, where Brookfield is about to begin a $400 million renovation. (In the interests of full disclosure, CO’s publisher and chairman, Joseph Meyer, is the husband of Kushner principal Nicole Kushner Meyer.) Declaration Partners jumped from 3,000 square feet to 11,500 square feet at Boston Properties’ 510 Madison Avenue. And Somm Cellars Wine & Spirits signed a lease for a new wine store at Waterline Square on the Upper West Side. (Don’t forget, booze purveyors are essential business, thank you very much.)
Outside of New York, Starwood and Jefferson Apartment Group acquired a 30,000-square-foot development site in Washington, D.C., and in L.A., CIT committed $37.3 million to build 92 affordable apartments at Jordan Downs in Watts.
And we even saw a $600 million refinancing! J.P. Morgan provided that titanic sum in CMBS refinancing on the Chase Center Towers in San Francisco.
Happy Memorial Day!
Update: This story originally said Development Site Advisors hired six people before the crisis and was looking to hire another four in June, but they also hired another six during the crisis.