Sunday Summary: Beyond Hurricane Ian
While it might feel slightly callous to look at a disaster like Hurricane Ian and think about the real estate implications, it’s not as though one of the worst storms ever to barrel down on Western Florida won’t have a big impact in that regard.
The real estate assets in Ian’s path (which stretch well beyond Florida) are worth an estimated $1.5 trillion. So, callous or not, these are considerations everyone must take seriously.
“Our storm preparations really are a year-round process,” JLL (JLL)’s Natalie Koglin, who’s based in Orlando and manages a 40 million-square-foot office and industrial portfolio across Florida, told Commercial Observer last week. That’s at least something to feel a little more secure about.
And despite Florida’s extreme weather vulnerability, it’s not as if Ian has done much to dampen the deals that are being reached in the Magic City.
Second, three Miami Beach hotels changed hands with Opterra Capital paying $28 million to Baywood Hotels for a Hilton Garden Inn in Mid-Beach; Assouline Capital and August Busch paying $33 million for the Red South Beach Hotel at 3010 Collins Avenue; and Catalyst Capital Group, a Canadian private equity firm, purchasing The Balfour Hotel from Moto Capital Group for $39 million.
Third, flex-office operator Knotel is making plans to occupy a Morabito Properties-owned warehouse that’s currently being converted into offices at 2143 Northwest First Avenue.
Finally, according to a tweet from Sam Bankman-Fried, his cryptocurrency exchange FTX is ditching Chicago and making Miami its U.S. headquarters.
It’s almost enough to make you forget that there is activity outside of Florida.
Leasing, leasing, leasing!
Hey! There were some big leases last week in New York. Like 347,474 square feet big!
At SL Green (SLG)’s still-under-construction One Madison Avenue, Franklin Templeton Investments took floors 11 through 22 in the 1.4 million-square-foot colossus scheduled for completion in 2023, which makes the lease one of the three biggest in 2022.
But it wasn’t the only lease that broke one hundred thou. D.E. Shaw & Co. (the hedge fund) took 283,000 square feet at Brookfield Properties’ 2 Manhattan West.
Of course, not every lease can break that barrier, and there were some seriously good ones a level down.
At 1 World Trade Center, New York Life Insurance Company is subleasing 47,355 square feet from Condé Nast. And the investment management platform Brevan Howard is almost quadrupling its space, going from 21,768 square feet to 83,403 square feet at Fisher Brothers’ 1345 Avenue of the Americas.
There were smaller leases, too. The Durst Organization’s 1155 Avenue of the Americas scored two leases with investment company Francisco Partners taking 10,985 square feet at the tower and law firm Jenner & Block taking 5,600 square feet. Likewise, a trio of medical tenants (Manhattan Integrative Cardiovascular, NY Laser Vision Optical and Shah Medical Associates) scored space at Jack Resnick & Sons’ 133 East 58th Street (the largest being Manhattan Integrative Cardiovascular, which took 2,879 square feet). The fashion brand Lingua Franca took 3,437 square feet at GFP’s 307 West 36th Street, and Ari Rastegar’s Austin-based real estate firm, Rastegar Property Company, is putting down New York roots with a 1,400-square-foot sublease at 54 West 21st Street.
This is activity that certain markets would envy.
We’re talking about you, New Jersey.
Yes, the Garden State’s office sector has continued to struggle. The availability rate for northern and central Jersey in the second quarter was 24.2 percent, in Jersey City and Hoboken it was 26 percent, and in Parsippany it was 33 percent. (By way of comparison Midtown Manhattan’s availability rate was only 17.6 percent in September.)
Unpack your knives and stay in D.C.
Washington, D.C., got a welcome piece of news this week: “Top Chef” host and Craft owner Tom Colicchio is choosing EQ Office’s Market Square as the site of his new full-service restaurant to open in 2023!
We also heard that Ridgecrest Village in Ward 8 scored a $38.7 million loan from The District of Columbia Housing Finance Agency for a rehabilitation of the 272-unit affordable housing development.
It’s enough to take your mind off the worrying state of D.C.’s office market. Getting tenants back to the office is still a tremendous problem in the nation’s capital (half of the workers are still working from home), and it was a big part of the discussion at last week’s CO “State of CRE in Washington D.C.” forum.
“In terms of the return to work, we are also doing everything we can, from events in our buildings, free coffee, bringing in speakers, etc.,” said Oliver Carr of Carr Properties. “But, at the end of the day, there’s only so much that we can do. It’s ultimately the responsibility of companies to make the decision to bring their people back.”
I dream of Avalon…
Housing remains one of the real estate assets that’s still holding up, and one sees proof in some of the recent real estate moves. The L.A.-based real estate investment firm Gelt ponied up $76 million to buy the four-story, two-building Avalon Studio 4121 at 4041-4121 Radford Avenue in Studio City from AvalonBay last week.
Speaking of AvalonBay, this week we also learned that they’re teaming up with flex workplace company Industrious for a first-of-its-kind partnership called “Second Space,” which will put flex spaces in some of AvalonBay’s southern California residential buildings.
This is good to see, because proptech (which is always what flex providers claim to be) has lost some of its shine recently.
According to MetaProp’s Mid-Year 2022 Confidence Index (a quarterly questionnaire that assesses the views of proptech startup founders and investors) investor confidence index came in at 5.8 out of 10, the lowest investor rating to date, and the startup confidence index was 4.2.
“The tech market has been atrocious,” said Aaron Block, co-founder and managing partner at MetaProp. “The proptech market has been impacted, as any one would have imagined. The good news and silver lining is that commercial traction and fundamentals remain strong. But there’s no sugarcoating the fact that the broader tech market has adversely impacted proptech at this slice of time.”
Restoring some of that confidence will no doubt be on the minds of attendees at CREtech NYC, the proptech conference to be held Oct. 12 and 13 at Pier 36. (Full disclosure: CO is a CREtech partner.)
And while it’s not quite proptech, exactly, we have to say that we were impressed with at least one brokerage that’s doing its net-lease marketing with a trading platform that features dashboards, real-time predictive pricing and an AI-driven exchange. We’re talking about the 5-year-old B+E, which can boast that it’s brokered the largest digital real estate transaction in the country when it did a $324 million sale leaseback of 11 properties comprising 1.6 million square feet. CO sat with its founder Camille Renshaw this week.
On a positively charged note
In an effort to get all 50 states on the electric vehicle bandwagon (wait, can bandwagons be electric?) the Federal Highway Administration approved New York’s plan to install more than 60,000 electric vehicle charging stations along the state’s major highways. Plus, the U.S. Department of Transportation has already committed $63 million to fund the effort.
Because with more and more states like New York adopting California-style electric car rules, this is the future.
You know what else is probably in the future? Modular building.
Demand shot up during the pandemic thanks to high labor costs and supply chain problems. And the demand might get even greater sooner than one thinks.
“In today’s interest rate environment, the speed of delivery is so important,” said Andrew Staniforth of Assembly OSM. “The faster you finish construction, the quicker you can turn off your high-interest construction loan. So, if you can shave 30 to 50 percent off a project’s construction time,” it can lower the overall construction cost.
Given the price of money right now, this must be on the minds of a lot of real estate professionals. Something to ponder as you enjoy the rest of your Sunday.
See you next week!