Sunday Summary: Everybody Exhale.

If you’re reading this, you made it. Well, with 72 hours to go, give or take — let’s not jinx it. 

A tough year of further recovery in commercial real estate is about to end. It was one chockablock with challenges such as higher financing costs, metastasizing distress and swelling insurance premiums. 

But it was a year of recovery — a clear recovery this time. Heck, even the office market caught a major break in 2024. After all, just look at San Fran-freakin’-cisco.  

The City by the Bay began the year where it had been since the pandemic’s early days: as a cautionary tale of urban decline and its effects on the built environment, not least the office market. Technology, San Francisco’s animating sector, had pulled back drastically on its space needs, and the city’s office vacancy rate jumped time and again. 

Yet, as 2024 winds down, San Francisco office is in … a good place. Commercial Observer pulled on its swim trunks last week and polar-plunged into the city’s office market — and found all sorts of positives: energetic leasing (including by AI firms) and stabilizing rents; sharp demand for trophy space, which is proliferating; and a shifting political climate (including a change in mayoral administrations) that’s boosting business optimism. 

Check it out. 

Going out with a bang   

A brisk investment sales pace has been one of the biggest trends during these last few months of 2024. This past week brought more.

The Westover Companies, a Pennsylvania firm, bought a 13-property multifamily portfolio in Manhattan’s Chelsea, for $94.5 million. In East New York, Brooklyn, Turnbridge Equities paid $29 million for a development site on which it plans to build a storage facility. In Queens’ Long Island City, an entity apparently connected to ZHL Group bought another development site for $27.6 million. That one might host a multifamily project. 

And, in the Financial District, Slate Property Group paid Sam Chang $94.5 million for the Radisson hotel at 52 William Street. Finally, Bridge Investment Group paid more than $105 million for a Frito-Lay distribution hub in East Williamsburg, Brooklyn. The deal showed up in city records on Boxing Day. 

The investment sales were not confined to New York, though. In Beverly Hills, Tishman Speyer sold its second office property in recent months — this one a $90 million trade near the California enclave’s Golden Triangle. And, in D.C., as if to remind us that so many of these trades are due to distress and/or plunging valuations, Colorado-based Real Capital Solutions was able to buy a Washington, D.C., office building for less than half what it last traded for in 2010. The nation’s capital also hosted a fairly normal office building trade this past week when JBG Smith (JBGS) sold one of its last holdings in the District for $110.1 million. 

The investment deals continued in South Florida, where Kushner Companies bought a multifamily property in Miami’s Edgewater for $190 million.

On the money 

2024 was a busier year in commercial real estate financing, and this last full week was no exception. 

For one thing, there was a gargantuan financing package for a gargantuan mixed-use project in Brooklyn’s East New York. Bank of America led the $412.4 million deal to finance construction of the second phase of Alafia, which includes 634 affordable housing units. Also in Brooklyn — this time in Downtown — developer Alloy Development secured $290 million to recapitalize its Alloy Block mixed-use project. 

The money flowed in South Florida, too: $78 million for a multifamily project in Davie, and $55.7 million for a project at the north end of Biscayne Bay that will include condos as well as boat slips (why not?).  

And it flowed in farther-flung places, like Biddeford, Maine, where the developer behind an apartment complex on the site of an old textile mill secured $31 million for condo conversions; and like Chesterfield, Mo., where the developer of a planned 32-acre production campus landed $35 million in C-PACE financing. (The environmentally conscious C-PACE financing space had a solid 2024 in general.) 

In store … 

Brick-and-mortar retail was another character in the story of commercial real estate’s 2024 recovery. Yes, there was a wave of fresh store closures, often due to retailer bankruptcies. But the overall market for retail real estate appears to have stabilized this year. 

For one thing, the holiday shopping season numbers are in, and guess what? Malls — once by and large written off as hopeless relics of the previous century — did pretty darn well compared to 2023. Some particular retail niches, such as stores that sell beauty products, even did well compared to pre-pandemic 2019.  

If you’re shopping for more retail intel, may we close out this final Sunday Summary of 2024 with an interview with David Lukes? He is the CEO of Curbline Properties, which specializes in smaller shopping centers that don’t lean on one large anchor tenant. There’s nearly 1 billion square feet of such centers nationwide. (Though shopping centers with anchors did pretty well the past 12 months.)

Thanks for reading the whole year round. See you on the other side.