Sunday Summary: The 1 Million-Square-Foot-Plus Lease Is Back!!


Now, that’s more like it!

Up until last week, we in the CRE media believed that the very biggest office lease of 2022 in all of Manhattan was a 456,518-square-foot move by KPMG to Brookfield’s new 2 Manhattan West, which was certainly a nice, big deal … but not what New York had come to expect when tallying the year’s totals. (Even the cursed year of 2020 had three leases that were bigger.)

SEE ALSO: Disneyland’s $2B Expansion Gets Anaheim City Approval

Well, less than a week into 2023, we learned that Rupert Murdoch’s Fox Corporation and News Corp. renewed their 1.1 million-square-foot headquarters back in December at Ivanhoé Cambridge’s 1211 Avenue of the Americas. The renewed lease runs until 2042.

This is particularly welcome because it was a speckled week for real estate, with some bad mixing with the good.

To get the bad stuff out of the way: Some of our 2022 report cards came in, and if this were a real report card our parents would take away the car, cancel prom and perhaps lock us in the fruit cellar. According to Colliers (CIGI), Manhattan office leasing declined 47 percent from the third quarter.


Only 4.9 million square feet of space was leased, the worst we’ve seen since the second quarter of 2021 and marking the sharpest drop since March of 2020. Even if Colliers revised its numbers to include the Fox and News Corp. leases, there’s really no way to spin that as anything other than genuinely horrible news.

In pure square footage terms, L.A. had it even worse; only 2.9 million square feet were leased in the fourth quarter, according to a report from Savills. This was a 19 percent drop from what it was last year, and the total number of square footage leased in 2022 was 12.3 million square feet a 32 percent dip from what it was in 2019.

Plus, housing, which had been the golden goose of the last three years, also took a big hit. There were 28.5 percent fewer condominium and co-op sales in Manhattan in 2022 than 2021, according to a report from Douglas Elliman, and one shouldn’t expect this to reverse itself anytime soon.

“I think that 2023 is going to be the year of disappointment,” Jonathan Miller of appraisal firm Miller Samuel (which prepared the report for Douglas Elliman) told Commercial Observer. “Sellers aren’t going to get the prices they were expecting in 2021, and buyers aren’t going to get the significant improvement in affordability.”

Oh, did we mention that the Crowne Plaza Hotel in Times Square has gone into bankruptcy? Well, it did.

But we meant it when we said that there was good mixed with the bad.

For instance, last week we learned that Blackstone (BX) Real Estate Income Trust (BREIT) secured $4 billion of investment from UC Investments, the University of California’s investment manager. It would be hard to think of a better vote of confidence in the future of real estate. (And these university eggheads wouldn’t do something unless they thought it through, right?)

And while office has remained the great symbol of uncertainty in real estate, the flight-to-quality part of the office story proves as true as ever.

There were 137 leases in Manhattan in 2022 with rents above $100 per square foot, as per a CBRE (CBRE) report. (Sixteen of them were above $200 per square foot!) This is a 27 percent increase from 2021.

Just last week there were a slew of impressive office leases announced: KKR (KKR) took a whopping 200,000 square feet at 30 Hudson Yards; Northwell Health took 42,000 square feet at One Court Square; CLO Virtual Fashion, a fashion design software company, subleased 17,238 square feet from cryptocurrency company Tzero Group at 1 World Trade Center; advertising firm R/GA is taking 17,360 square feet at GDSNY’s 322-326 Seventh Avenue, aka 28&7; the L.A.-based Silver Rock took 8,652 square feet at 575 Madison Avenue.

And the big industrial lease marched on. In Southern California, Sunrise Brands, a designer, producer, distributor and retailer of apparel, took 446,000 square feet at Tejon Ranch Company and Majestic Realty’s Tejon Ranch Commerce Center for a future distribution facility.

Indeed, in the end, there needs to be a little perspective about the situation we’re currently in. On Friday, for instance, we learned that there were 223,000 new hires in December in the U.S. a slowdown from previous months, but a sign of an inarguably robust job market and an indication that the Fed’s efforts to tamp down inflation might be working.

Plus big picture a lot of financial institutions have been better protected against prolonged disruption than they have been in the past.

“When we think about comparisons between where we are today and the Global Financial Crisis, one of the key differences here is that the financial associations today, while under real pressure, are able to bring capital to well-structured projects,” Sam Chandan, director of New York University’s Chen Institute for Global Real Estate Finance, told CO in our look ahead for 2023 piece.

Just as an example, last week Related Group scored a $164 million construction loan from Truist Bank for a multifamily rental in Miami’s Brickell. (Weird fact: This Related project is on a site where the developer discovered prehistoric remains.)

New year, new platforms

Of course, all of this requires the shrewd operators to adjust and think differently. 3650 REIT started the year with actions that speak to that.

The REIT launched a new transitional lending platform to complement its ​​bridge and event-driven and stable cash-flow offerings. 

“The transitional lending platform fills a crucial financing gap for borrowers in this part of the real estate cycle,” Nishant Nadella, managing director and head of single-asset, single-borrower and transitional lending at 3650 REIT who will lead the new platform, told CO. “Importantly, these loans will offer borrowers bespoke, short-term financing solutions as they navigate today’s challenging financing markets along with property-specific business plans.”

Sounds interesting…

We also took the new year as a place to take stock of the proptech market and what is probably to come.

“I definitely think we’re going to see a fair amount of consolidation in 2023, but I think it’s going to be more back-half loaded,” MRI software’s John Ensign told CO. “The credit markets have clearly tightened, interest rates are up, direct investment dollars have slowed. We’re also seeing what I would say is almost the hangover effect of the end of the bull market, in which companies were being heavily rewarded for growth above all else.”

The new year is also a chance to speculate on Kathy Hochul’s plans now that she doesn’t have a looming election to worry about.

“We know that New York is the place that workers, families and businesses want to be,” Gov. Hochul said at an Association for a Better New York (ABNY) breakfast on Dec. 14, “but many cannot afford to move here, to live here, or relocate here. … The question is, why didn’t we build housing?”

Good question.

Details will probably be filled in at Gov. Hochul’s State of the State address this week, but we are waiting with bated breath and we have our own theories.

Rolling the dice

Finally, New York is getting serious about awarding licenses for casinos.

We spoke to executives at a couple of the firms hoping to get the coveted nod, including Thor Equities’ Melissa Gliatta and Soliviev Group Chairman Stefan Soloviev and CEO Michael Hershman, about their plans.

Somebody’s going to get lucky, but a lot more developers — Related, SL Green and others — are in the mix.

We hope your 2023 has been off to a great start see you next Sunday!