Sunday Summary: City of Yes, Yes, Yes!!

Many in the council were eager to tout the passage of the plan.

“Our modifications prioritized creating the greatest number of homes while maintaining the fair housing principle that every neighborhood contributes in a plan that could be approved,” Council Speaker Adrienne Adams said before the vote. “This council has led efforts to make housing more affordable, especially at the deepest levels needed by most New Yorkers.”

But probably no group was happier than developers. The program would “open up a floodgate of conversions,” according to Bill Rudin, who was speaking at a New York University panel earlier in the day.

Likewise, MaryAnne Gilmartin (who was on the same panel) said: “We are the city of no, and that’s why we needed a program called the City of Yes. It’s catalytic to what needs to happen in this city to provide 50,000 new units of housing per year. … It’s going to create housing at a much faster pace.”

Rosenberg & Estis counsel David Rosenberg called it “the most consequential zoning change the city has seen in decades,” in a column in CO.

Indeed, developers are already raising serious amounts of capital with conversion in mind.

Even before the City Council vote, CO learned that Dune Real Estate Partners and TF Cornerstone had partnered to form a $1 billion venture they’re calling Alta Residential, which will zero in on office-to-residential conversions in Washington, D.C., Boston, Dallas, Atlanta, San Francisco, Los Angeles and … New York City.

“Given the need for owners of underperforming office assets to re-evaluate the highest and best use of their properties, combined with ever-increasing need for new housing, we are confident that we’ll be able to scale Alta very quickly,” said TF Cornerstone CEO Thomas Elghanayan.

And, while certain problem offices like the Helmsley Building remain a big headache for owner RXR, Scott Rechler has not forsworn making the office icon residential.

Do we want to convert?

Of course, conversion makes sense in an oversaturated office market and underserved residential market, but we have to admit that given the leases we’ve seen over the last few months our faith in office is partly restored.

That comes with some caveats. There’s currently a big gulf between asking and taking rents. And, while leasing was strong in October, it faded somewhat in November. About 3.9 million square feet of deals were inked in October, but that activity declined 12.4 percent to 3.4 million square feet last month.

However, this is almost double what it was in November of 2023! (And it’s well above the 10-year monthly average of 2.68 million square feet.)

Plus, December has already started really, really well with several leases above the 75,000-square-foot mark.

First up, the big fish in any office deal, Amazon (AMZN), took a 303,741-square-foot lease at Vornado Realty Trust (VNO)’s 330 West 34th Street as part of a deal through WeWork.

Authentic Brands Group (which owns labels such as Reebok and Brooks Brothers) renewed its existing 75,000 square feet at 1411 Broadway and tacked on an extra 25,000, bringing its total up to 100,000 square feet at the property, owned by Ivanhoe Cambridge and The Swig Company.

And that was not the only expansion: Metropolitan Commercial Bank is going from 55,200 to 81,979 square feet at 99 Park Avenue.

Across the street, business management consulting firm Alvarez & Marsal took 220,221 square feet at SL Green Realty’s 100 Park Avenue.

By the way, can we all stop and tip our hat to the folks at SL Green? They must be putting something in the water at One Vanderbilt because the REIT also closed out the week nailing a $1.25 billion modification and extension on One Madison Avenue, and raised $250 million from the Canadian pension fund Caisse de Dépôt et Placement du Québec for the SLG Opportunistic Debt Fund, which will be purchasing loans or loan portfolios around New York.

Industrial deals are thriving!

Office is not the only asset class that had a good week. On Friday we learned that Link Logistics (Blackstone’s industrial arm) sold 791,618 square feet of warehouses in Sunrise, Fla., to Elion Partners for $205.5 million.

In the City of Industry in Southern California, appliance retailer Howard’s signed a 68-month, $11.1 million, 127,540-square-foot lease for a new headquarters and distribution center at 111 North Baldwin Park Boulevard from landlord Michael Tang.

And the Irvine, Calif.-based Proficiency Capital nabbed a three-year, $32.2 million floating-rate loan from City National Bank on its nine-building, 231,696-square-foot McGee Business Center I & 2.

Holiday shopping

This upcoming week is a big one for people in retail, with ICSC coming to the Javits Center on Dec. 11 and 12.

And there’s a lot to talk about in retail.

Yes, there are individual leases that excite those of us at CO, like Calvin Klein taking 7,294 square feet to open a new flagship at Michael Shvo’s 530 Broadway, or Rodd & Gunn taking 3,378 square feet at 555 Fifth Avenue, but there are bigger trends to examine and digest.

Miami, for instance, has an interesting retail story: There’s no available space.

According to a Colliers report, at the close of the third quarter Miami-Dade County’s retail vacancy rate was just below 3 percent, and Broward and Palm Beach counties’ rates were each under 4 percent. Part of this has to do with the appetite for residential space, which means that any available site has been scooped up by multifamily-mad developers.

This in turn means that even when a restaurant closes, the site doesn’t stay vacant for long.

“If you wait until a retail space is vacant and there’s a sign on the window, you’re typically too late,” said Steve DeMeo of Lee & Associates.

As for Miami’s hospitality, it’s worth big, big money. Jeffrey Soffer, for example, is looking for $1.2 billion to refinance the Fontainebleau Miami Beach.

And the tenants that are descending on Miami are the big names, like OKO Group and Tao Group Hospitality, which are teaming up to open a restaurant and private club tentatively called Miami Members Hospitality at 830 Brickell.

But it also helps to sit back and get a bird’s eye view of the industry from one of its legends. So CO sat down with Cushman & Wakefield (CWK)’s Joanne Podell to speak about everything retail, and it’s worth a read before heading to Javits.

See you next week!