Sunday Summary: This Is the Jerome Powell We’ve Been Waiting For!

The rate cut is here!

And for those who thought that Powell (given the levels of caution the Federal Reserve chairman has exhibited thus far) would keep the cut a prudent quarter point or so, the Fed exceeded expectations and went for a full 50 basis points, or half a percentage point.

“This recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation as we begin the process of moving toward a more neutral stance,” said Powell at the subsequent press conference. “The U.S. economy is in a good place, and our decision today is designed to keep it there.”

From Commercial Observer’s office on Whitehall Street, we could practically hear the Champagne corks popping on Wall Street. (Indeed, the next day the stock market reached an all-time high.)

Moreover, the cutting is probably not over.

“For investors [this] is the clear signal that, based on current information, the Fed will likely cut by another 50 basis points this year and 100 basis points in 2025,” Sam Chandan, director of New York University’s Chen Institute for Global Real Estate Finance, told CO. “As recently as July, the Fed was signaling that a 50 basis point cut was not on the table.”

Of course, we knew that some rate cut was inevitable. And it probably was coming this year. Some worried that the Fed would be accused of playing politics if the cut was too close to the election, and others were not fully convinced it would be aggressive enough. But for the last few months an eventual cut had been priced into the market, and that’s why 2023’s stagnation has given way to slow but sure activity.

To cite some examples from just last week.

We saw Ricardo Dunin go to contract to buy a 0.6-acre site in Miami’s Brickell at 132, 142 and 152 SW Ninth Street, where he plans to build an ambitious 832-key hotel.

UCLA plunked down $39 million to buy the 62-unit Canfield Apartments at 3301 South Canfield Avenue about five miles from campus. The apartments were purchased from Helio in an all-cash deal.

And in New York there were several such deals, including ZD Jasper Realty securing $117.5 million in construction financing for its new condo being built at 430 West 37th Street, and Benjamin Landa selling his 183-bed nursing home in Far Rockaway for $47.3 million.

If these numbers seemed a little mid-range, there was the blockbuster deal, too, when Gencom acquired the Thompson Central Park New York hotel for $300 million.

Yankee territory

It’s September, and that means the pennant race is in full swing. If you’re a New Yorker, you’ve no doubt been on the edge of your seat. Not only are the New York Mets in a tooth-and-nail struggle to secure their wild card position (in the process they scored 10 runs in three consecutive games last week!) but the Yankees clinched a playoff berth — which will mark the club’s 59th postseason appearance! (Oh, yeah: While it’s not New York, Shohei Ohtani enjoyed perhaps the greatest game in history when the Dodgers clinched on Thursday night.)

Maybe it’s some of that Bronx Bombers fever sweeping over us, but we noticed there was significant Bronx activity last week.

Maddd Equities, Joy Construction and Food Bazaar partnered to purchase a development site at 1959 Jerome Avenue in Morris Heights, which they spent $22.6 million on.

Over in Mott Haven, Beitel Group got construction financing for its new multifamily projects from SCALE Lending (which is Slate Property Group’s debt financing arm) to the tune of $135 million.

Finally, The Doe Fund, which provides work, housing and education for the homeless and the formerly incarcerated, purchased 2738 Creston Avenue in Fordham for $26 million.

“WFH”? STFU

Amazon (AMZN) is through playing games with its I’d-rather-work-from-home workforce. CEO Andy Jassy said in a letter to employees that starting in 2025 they’re expected in the office five days a week.

“We’ve decided that we’re going to return to being in the office the way we were before the onset of COVID-19,” Jassy wrote. “When we look back over the last five years, we continue to believe that the advantages of being together in the office are significant.”

This is no doubt music to the real estate industry’s ears.

Indeed, others might be taking up Jassy’s call to arms. Among the office leases we saw last week, private equity firm 17Capital is taking 16,298 square feet at Property & Building Corporation’s 452 Fifth Avenue, aka 10 Bryant; Helmsley Spear is expanding and moving its headquarters to 747 Third Avenue; Circle Internet Financial, the crypto firm, is taking 34,328 square feet at 1 World Trade Center; and the newly founded PR company Orchestra is taking 42,000 square feet at L&L Holding Company’s 195 Broadway.

A mighty wind

Of course, that doesn’t mean that the office market is back, exactly. Nor does it mean that the office market is the same in every region.

In last week’s issue, CO took a look at Chicago’s office environment … which is, well, a mixed bag.

While the toddlin’ town hosted the Democratic convention over the summer, as well as Lollapalooza, and gets great reviews for “The Bear,” its office scene is still extremely rickety.

“Before the pandemic, office vacancy was 13 percent,” said Tomasz Piskorski of Columbia Business School in CO’s story last week. “Now it’s about 29 percent, if you include subleasing — without subleasing, it’s at 24 percent. One-third of space is essentially vacant or being subleased, there is not yet a full return to office, and the city has fiscal issues and other quality-of-life problems.”

Not everybody, however, is so convinced that the news is all bad.

“We are seeing some bright spots in the market,” said JLL (JLL)’s Andy Strand in our Sit-Down. “When you look at the data, it’s always a little behind in terms of what we’re actually seeing from a tenant representation standpoint. We are seeing quite a bit of activity. I’ll bet it’s smaller than it was pre-pandemic, but we’re starting to see people really buy into the office, including requiring employees to be in office a few days a week.”

And Chi-town’s multifamily is a pretty positive story that promises to get better — the vacancy rate is 5.6 percent, and shrinking, something savvy investors have noticed.

“I think it’s an extraordinarily attractive market today, the fundamentals are fantastic,” said Thomas Shanabruch of CRG. “One of the nice things about Chicago is that it’s always slow and steady. You’ve seen that in rent growth numbers, you’ve seen that in continued absorption in the market, and, looking to the future, if you’re an owner, there’s reasons to be extraordinarily optimistic.”

All three of these stories are worth a nice leisurely read. And it should give you something to take your mind off of Chicago’s historically bad White Sox.

See you next week!