Sunday Summary: Hooray for Hollywood!

“Parts of the studio are severely outdated,” Michael Klausman, president of Radford Studio Center, said in a statement. “What we’re doing is keeping the facilities that are up to date and replacing obsolete spaces with the modern soundstages and production facilities that today’s content creators demand.”

The plan will add another 1 million square feet of soundstages as well as production facilities and office space; and, according to a study by the L.A. County Economic Development Corporation, the project is expected to generate $5.5 billion in yearly revenue (plus 8,070 jobs) once it’s up and running.

It was an interesting week in Southern California real estate in a lot of ways.

Hillwood Development Company (which is owned by Ross Perot Jr.) spent $543.7 million to acquire Auto Club Speedway in San Bernardino from NASCAR. (The 633-acre property includes a two-mile racetrack and can accommodate 122,000 fans.)

Will the cars keep running?

While Hillwood and NASCAR did not return Commercial Observer’s calls, NASCAR told fans that the race conducted a week ago would be the last one at the stadium. Moreover, CBRE announced that 364 acres at the site are set for a major logistics development called Speedway Commerce Center. So, farewell, race cars. Hello, major industrial tenant.

It’s understandable that industrial and logistics would be where the smart money would go — the numbers just keep revving upward! Last week CO also learned that Positive Investments sold Gifford Business Park, a 156,717-square-foot industrial site in the Inland Empire, for $26 million to MIG Real Estate. This was 23 percent higher than Positive paid for the site just 17 months ago!

Lovely, lovely leasing

One always feels a lift when one hears about the new big deals that have crossed the finish line, and there were a few significant ones last week.

In Miami, the famed New York City eatery Avra Estiatorio is opening its second location in South Florida consisting of 15,000 square feet at Newgard Development Group’s Lofty condo development in Brickell. (Speaking of Brickell, Mexican developer Menesse International spent $6 million to purchase 1870 Brickell Avenue from the Carlos Saenz Family Trust, nabbing one of the last vacant sites along Brickell Avenue.)

Even more intriguing, the Parisian club Lapérouse (which was founded in 1766 and over the centuries has played host to luminaries like Victor Hugo, Émile Zola, Honoré de Balzac, Colette and Marcel Proust) has decided that its American debut should take place at the Bal Harbour Shops north of Miami Beach.

And, despite the fact that the State of Florida has been — how shall we put it? — less than hospitable to BlackRock (last winter, in a fit of anti-woke pique, Florida’s state treasury removed BlackRock as the manager of some of the state’s investments) the company nevertheless renewed its 5,103-square-foot lease at Nuveen’s 701 Brickell. (More on ESG in a bit.)

There were some good leases in New York, too. 

STV, a construction, architecture, contracting and engineering firm, is taking 65,248 square feet at the Empire State Building; Axis Insurance has secured a 40,240-square-foot lease at 1166 Avenue of the Americas; Temasek, a Singapore sovereign wealth fund, renewed and expanded its 26,062-square-foot office on the seventh floor of the Seagram Building; the U.K.-based private equity firm Hg took 14,000 square feet at the Grace Building; the law firm Binder & Schwartz is relocating to 8,496 square feet at 675 Third Avenue; and, finally, the NYPD renewed its 42,179-square-foot lease at 45 Nevins Street in Brooklyn and grabbed another 17,862 square feet of office space (plus 6,900 square feet of parking) at 188 West 230th Street in the Bronx. (The NYPD might have pretty good real estate sense. Sluggish market or not, the Bronx has held up surprisingly well.)

As for the less sunny news…

It perhaps takes a real estate professional to appreciate the fact that a significant portion of the pain at Twitter (not counting a tremendous amount of internal drama) is about the fact that the social media company overextended its footprint during the fat years.

Now that things are lean in tech (but not so much the rest of the economy) there has been a great deal of speculation about what would happen with Twitter’s massive office commitments. Back in December, there were reports that the company had simply stopped paying rent, and a month later its landlords in the U.K. and San Francisco filed lawsuits.

This week we got some more definitive answers about the state of Twitter’s New York real estate — it’s trying to sublease it.

Some 200,000 square feet of space at 245 West 17th Street and 249 West 17th Street has gone on the market, which begs the question: How much presence will Twitter even have in New York if it manages to get rid of all that space? (Twitter did not return CO’s calls.)

It’s a nerve-wracking question. But a lot less nerve-wracking than what another tenant’s real estate retrenchment would mean for the Washington, D.C., market…

We’re talking about the federal government.

About 363,500 federal workers are employed in the District, but in a scene out of “The Last of Us” there are still empty government offices strewn around the capital with 2020 calendars on the walls. The General Services Administration (GSA) leases some 43 million square feet of space, and the fact that a significant portion of it is sitting unused should be concerning.

“The private sector is slowly inching back,” said Lucy Kitchin, who leads Transwestern’s government services advisory group. “But the federal government is not back, and that’s having serious implications on transit and transportation, retail, and eventually it’ll have tax implications for D.C.”

The GSA signed only a single lease in the fourth quarter of 2022. And, if the GSA decides to bite the bullet and really reduce its office space, this would certainly make the District’s bleak tax revenue projections much worse. (At least there was some leasing activity in our nation’s capital, with The Disabled American Veterans signing a 19,500-square-foot lease at Franklin Square.)

There was other less-than-rosy news outside of D.C., too.

More defaults occurred last week. Blackstone defaulted on a $562 million bond of Finnish properties backed by the landlord Sponda Oy — oy vey!

Years of disputes among its owners is sending the legendary Flatiron Building to the auction block next week. (Actually, the auction might literally take place on the New York County Courthouse steps!)

And construction starts all around the country were down in the first month of the year. Last week, the Dodge Construction Network reported a 27 percent slide in the dollar value of construction costs from December to January. (Although Dodge was quick to say that one shouldn’t draw too many conclusions from this. “January’s decline in construction starts should not be taken as the beginning of a cyclical downturn in the industry,” said Richard Branch, Dodge’s chief economist. “Numerous megaprojects have begun over the last few months, obscuring the underlying trend in construction activity. While some construction sectors will face stress as the year progresses, current fundamentals point to an industry that is fairly well positioned to weather the storm.”)

Let’s talk about ESG

Florida’s unsparing attack on ESG is beginning to find boosters in other parts of the government.

Last Wednesday, the U.S. Senate passed a bill overturning the Biden administration rule allowing the U.S. Department of Labor to consider ESG in its investment decisions in workers’ retirement funds. (It was a relatively slim margin of victory, and President Biden is expected to veto the bill.)

There is also growing backlash against some ESG-related ideas. In the U.K., “15 Minute Cities” are coming under attack as “dystopian” and an elaborate conspiracy that is somehow related to Nazi-occupied Poland. (Seriously, don’t ask us to connect the dots on that piece of histrionics.)

Still, ESG and DEI remain critically important issues in commercial real estate.

Almost three years ago, when the country erupted in protest over the murder of George Floyd, a lot of companies promised to become more diverse.

CO decided to examine their track record, and the results were something of a mixed bag. Likewise, the New York Times looked at the top 112,000 developers in America and discovered that roughly 111,000 of them were white-owned.

Also, women disproportionately left the workforce at the onset of COVID-19 (about 2 million women total).

One positive story is that the number has largely rebounded. As for women in CRE specifically, many women who left their 2020 jobs in the end opted to join competing firms or start their own, according to Dionna Johnson Sallis, director of DEI for Ferguson Partners.

And one can see examples of grit and determination everywhere — from the big firms, like Newmark, which just named Elizabeth Hart as its head of North American leasing (she spoke to CO here) to smaller operations like Alexis McSween’s Bottom Line Construction and Development. McSween is a true success story — she rose from poverty as a child to start Bottom Line, and was named New York Female Entrepreneur of the Year Award by the Small Business Administration in 2020.

All things to think about this month. (March is Women’s History Month.)

Speak to you next week!