Sunday Summary: Put on a Happy Face!
Hey, gloomy Gus, turn that frown upside down!
Because for all of the caterwauling about the state of the market, the raw numbers were a lot better in the first half of the year than they were in the first half of 2021. According to a report from Cushman & Wakefield (CWK), New York City did about $21.6 billion in investment sales — a 99 percent increase from the first half of last year!
The good data was spread out among all sectors: multifamily was up 373.1 percent; office was up 168.1 percent; industrial up 83.8 percent. Even retail, the redheaded stepchild of the industry, saw an increase of 57.7 percent.
And we’re seeing evidence of this in the business that was transacted this week.
Leasing in Manhattan was … pretty damned good! Capital One (COF) did a 78,000-square-foot deal at 11 West 19th Street, and this is right on the heels of doing a 60,000-square-foot expansion at 114 Fifth Avenue for a total of 116,926 square feet at the address. Also at 11 West 19th Street, fashion designer Tory Burch inked another jaw-dropping 130,000-square-foot renewal. At 123 William Street in FiDi, the General Services Administration renewed its 48,211-square-foot space.
Over in Brooklyn there were also some notable biggies. Huge, the marketing firm, nabbed a, well, huge 71,000-square-foot lease at Rudin Management’s Dock 72. And Lidl, the grocery store, took a 25,000-square-foot lease at Billy Macklowe’s 120 Fifth Avenue in Park Slope. (Lidl was not the only grocery store that signed something in Brooklyn last week; Boxed took 14,795 square feet at RXR’s 470 Vanderbilt Avenue.)
Sales also had an interesting week. Related Fund Management plunked down $61 million for a 337,659-square-foot mixed-use building in Long Island City, and Capital Automotive Real Estate Services shelled out $54 million for a Jaguar and Land Rover dealership at 809 Neptune Avenue in Coney Island.
Even flex office seemed to be having a not-so-terrible time of things. Revenue rose at WeWork (WE), according to its latest earnings report, and occupancy has finally reached pre-pandemic numbers. (Although losses rose, too.)
On the other hand …
Fine, we admit that there are market headwinds — or, as Vornado’s Steven Roth said on this week’s investor call, “choppy conditions.”
“There are signs of a slowdown all around a rapidly slowing housing market, falling consumer confidence, and companies announcing hiring pauses or even layoffs,” Roth noted. “While we are protected by long-term leases with about 1,500 tenants, we do expect that we are prepared for choppy conditions.” (In Starwood (STWD)’s earnings call Barry Sternlicht sounded equally cautious, even though Starwood could report $212 million in second-quarter earnings, an 83 percent rise from the previous year.)
And if you’re looking for it, yes, there are signs that should make everyone at least a little concerned.
American Dream Mall, for instance, missed an $8.8 million bond payment. This is not good news for the 3 million-square-foot Rutherford, N.J., colossus, which lost around $60 million last year.
It’s not as though inflation is a non-issue, either. New York City construction saw an 8 percent rise in costs last year, one of the largest of any city anywhere. (Maybe President Biden’s Inflation Reduction Act will quell these numbers.) Plus, there remains a shortage of manpower.
“Construction hiring was up 14 percent but the amount of construction jobs posted was up 49 percent,” said Paraic Morrissey, an associate principal at Rider Levett Bucknall, which issued a report about the industry. “The biggest strain on the construction industry is labor shortage.”
Those who have staked a big claim in the metaverse have also not been having a great time of it, lately. According to a report in The Information (which called the situation a “meltdown” — everyone’s favorite calming term), along with the plunging figures for crypto and NFTs, the prices for real estate in the metaverse have fallen by almost 80 percent.
Overall, a sense of nervousness in the market is driving an abundance of caution.
“I’ve had a number of deals that have been put on hold, probably because of the uncertainty of interest rates in the capital markets,” said Jay Neveloff of Kramer Levin in this week’s cover story.
Neveloff is hardly alone in this. Anecdotally, CO spoke to many real estate professionals who are hustling much harder for fewer deals.
Let’s get back to the good stuff!
Provocative political press conferences from the guv aside, South Florida’s real estate luck has remained spectacular of late.
Whatever else you can say about the lending environment, Fort Partners was able to secure $169 million to build an 11-story oceanfront condominium at 9165 Collins Avenue called Hillcrest by the Sea, just four blocks from the site of the Surfside condo collapse.
Federal Realty shelled out $181 million for the Shops at Pembroke Gardens from Jeffrey R. Anderson Real Estate. (See, we told you there was good retail news! Although the seller did pay $188 million in 2013. But that was then.)
The only bad thing this week, from a Miami ownership perspective, is if you’ve got your own football team. If, say, you’re the real estate mogul who owns the Dolphins, you did not have a very good week.
One last thing to worry about!
You know how every office landlord in the country is sweating through the work-from-home trend. Well, here’s another thing that they should worry about: asynchronous work!
Of course, the 9-to-5 schedule has not really been in effect for a very long time. But having no schedule? (Which is more or less what asynchronous work is.) Just keeping up with colleagues on Google and Slack channels?
That’s a doozy. Great story to give you the “Sunday Scaries” before going back into the office tomorrow.
Oh, wait — you don’t have to go into the office tomorrow because of WFH. And you don’t have to work tomorrow because of asynchronous work.
Help us out, Bill Murray.
See you next week!