Sunday Summary: The Year of the Resurrection

Perhaps the only people more unnerved by the indictment of Eric Adams than Adams himself might have been those in the real estate community.

New York City’s mayor was seen as the industry’s champion. The fact that Adams was indicted on five counts of bribery, wire fraud and government corruption has suddenly thrown into doubt all the ideas that he has put forth about housing, new zoning and the City of Yes proposals.

But, in terms of its public face, commercial real estate has remained noncommittal.

“The real estate community is probably covering their bets,” said Kathy Wylde, president and CEO of the Partnership for New York City. “I have not gotten the sense that there was any interest in pushing the mayor out as opposed to giving him a chance to defend himself and address the question of how he’s going to deal with his case.”

But if the mayor finally is shown the door? What then? Could his replacement be … Andrew Cuomo?

While this might sound like the stuff of “writer’s room” fantasy, restoring Cuomo to a position of power might not be so far-fetched. Cuomo certainly made his share of enemies during his tenure as governor, but the alternatives look more unthinkable for CRE.

There’s City Comptroller Brad Lander, former Comptroller Scott Stringer, state Sen. Jessica Ramos and Zohran Mamdani of Queens, state Sen. Zellnor Myrie of Brooklyn, and New York City Public Advocate Jumaane Williams, all of whom would be considered more progressive than the former governor (Mamdani is a literal socialist).

Heck, it’s not as though Cuomo is the only politician actively pursuing electoral restoration. So we’ll see what happens.

Big leases

Another week, another three leases breaking the 100,000-square-foot mark.

Specifically, we’re talking about LVMH, which took a whopping 150,000 square feet at 590 Madison Avenue. (This is on top of the 150,000 square feet that LVMH took just last year just a block away at 550 Madison.)

Then there’s Ramp, the finance automation platform, which just upped its presence at Williams Equities’ 28-40 West 23rd Street by 60,000 square feet, bringing its total footprint to 132,000 square feet at the Chelsea property.

And, finally, there was Chobani, the Greek god of yogurt, which has descended upon 360 Bowery and claimed 121,000 square feet.

That’s not even mentioning OpenAI taking 90,000 square feet at the Puck Building; or IWG (the Swiss-based coworking operator), which just missed the six-digit cutoff when it took 93,400 square feet at 142 West 57th Street; or Bridgewater Associates, which scooped up 60,000 square feet at 295 Fifth Avenue. (Speaking of coworking, it would appear that Adam Neumann is also champing at the bit for a second chance, having unveiled a new coworking rival to WeWork called Workflow, an apparent spinoff from his Flow real estate brand.)

All of which speaks well of New York leasing. According to a report last week from Avison Young, there were 23.1 million square feet of leases signed in the third quarter of 2024, which is a 25.1 percent gain from the same period last year. Moreover, office vacancy fell below 19 percent for the first time since 2021.

None of which is to say that some markets aren’t doing better than others, even in New York.

While Midtown rents remain healthy at a weighted average $79.84 per square foot for effective rent, according to CompStak, rents in Lower Manhattan are much more attractive to tenants at $45.80. This might sound bad for landlords in Lower Manhattan, but it could also mean a boon is just over the horizon, and not just because of pricing.

“The next couple of quarters, you will see a big uptick in leasing,” said CBRE (CBRE)’s Adam Foster. “It comes as no surprise. Following COVID, everyone wanted to be right on top of transportation. To that end, the World Trade Center and the buildings along Broadway have been the recipient of most of the demand.”

And Manhattan will probably win out over markets like Brooklyn, despite the fact that there’s plenty of newer, more cutting-edge product in Brooklyn. A lot of tenants have already decided that they’d prefer good Manhattan to great Brooklyn.

It should be noted that New York is not the only metropolis reporting good office news. Los Angeles is seeing the highest level of activity since 2020 with some 3.8 million square feet signed in the third quarter, which is 27 percent more than the same period last year, according to Savills. Sure, some of the offices are still trading at steep discounts (see Union Bank Plaza, which just sold for $80 million and traded last year at $110.5 million) but big leases are being signed, like Google renewing the 196,238 square feet it currently occupies at 19510 and 19520 Jamboree Road in Irvine. (Washington, D.C., might be a different story. Last week the General Services Administration terminated a 1.2 million-square-foot lease for a new Securities and Exchange Commission HQ at 60 New York Avenue. Ouch.)

Data and distress

Barry Sternlicht’s Starwood (STWD) (and its subsidiaries) was busy last week.

First, LNR Partners took back an office property at 29 West 35th Street in Midtown that had defaulted on a loan.

But if you’re reading this, you know that there’s a lot of distressed assets out there that will probably change hands in the near future. As CLO issuance rose last year, so did the number of defaults. CMBS issuance has had similar problems.

Second, Starwood wrangled the mother of all tenants, Amazon, to occupy two of its data centers at 13860 and 13876 Redskin Drive near Hattontown, Va.

We suspect the guys at Starwood are onto something smart in going into data centers. Last Tuesday, Equinix, the data center developer, announced a joint venture with GIC and the Canada Pension Plan Investment Board to raise $15 billion to build this asset class coast to coast.

In short, there’s a lot of activity coming down the pike; presumably a good, shrewd broker will be able to navigate these deals.

Sunday reading

On this Sunday morning, after getting a bagel and lox, we invite you to kick back and check out the photos from Commercial Observer’s Power Gala late last month. A collection of some of the very best names in CRE were in attendance … and what were they talking about? Real estate, of course.

Because we know that you, too, can’t get enough, we’ll leave you with three stories to ponder.

No doubt, many of our readers will have heard something about RFR’s many difficulties of late, but probably their biggest headache is with their greatest prize: the Chrysler Building.

CO took a deep dive into why this icon of New York City remains such a thorny rose.

Second, we took a look at the coming drought in hotel properties. Despite pretty good occupancy levels currently, numerous hotels have been effectively taken out of circulation as migrant housing in the last couple of years, and the development pipeline has pretty much dried up for myriad reasons.

Finally, for those who’s appetite we whetted with the talk of CMBS lending earlier, it would help to read our Sit-Down with UBS’s Nick Galeone.

See you next week!