Sunday Summary: Let the Retrospectives Begin
By The Editors December 15, 2024 9:00 am
reprints
As we near the end of 2024, CO always looks back at the year that was.
A lot of brokers and owners like to throw around their general vibes about the year that just passed and (unless the year is a real stinker … looking at you, 2020) they do their very best to avoid using the word “bad.”
But rather than relying on mood rings and feelings, there are measurable ways to look at the market and how it fared.
First up: Leasing.
This was an unalloyed positive — at least in comparison to 2023.
New York University scored a 1.18 million-square-foot lease from Vornado at 770 Broadway, Blackstone also cracked the 1 million-square-foot mark with its lease at 345 Park Avenue, and Bloomberg took two spaces — 946,000 square feet at 731 Lexington Avenue and 924,000 at 919 Third Avenue.
These top four leases of the year were all larger than the largest lease of 2023.
“I’m hesitant to say ‘recovering,’ because this is going to be a slow journey,” said CBRE’s Julie Whelan when CO looked at how the office market seems to have tipped back into something like normalcy. “However, we feel that we have reached a point of stabilization, which means that organizations don’t seem to be downsizing as much. We believe that leasing activity should continue to pick up.”
Amen!
Second: Investment sales.
Back in December 2019, CO decided to look at the biggest deals of the 2010s. We discussed Hudson Yards, Google, Stuy Town, the World Trade Center, Billionaires’ Row — and on and on.
All of the aforementioned deals were worth billions. (In some cases many billions.) By that standard, 2024 fell well short — at least when it came to big, hulking office projects.
But that doesn’t mean there wasn’t serious green traded back and forth.
The top dog of the year was Jeff Sutton and SL Green (SLG)’s sale of 715 Fifth Avenue to Kering for $963 million, which closed earlier this year and was part of two deals Sutton wrapped up at roughly the same time worth $1.8 billion. (Speaking of Sutton and SL Green, did we mention that the former also purchased a $34 million stake in 690 Madison Avenue from the latter last week?)
SL Green also sold 625 Madison Avenue for $635 million and sold an 11 percent stake in One Vanderbilt for $490 million, which counts for three of the top four deals of the year, making it not a bad 12 months for SL Green CEO Marc Holliday.
Of course, there were billion-dollar-plus moves in real estate beyond just the single, individual office property.
“We really felt like this is the time to go on offense and not wait for some kind of all-clear signal,” Blackstone Real Estate’s Kathleen McCarthy, told CO’s Cathy Cunningham at the Real Estate Board of New York’s annual commercial brokerage holiday luncheon. “This has been an incredibly active investment year for us.”
How active?
McCarthy said Blackstone has picked up some $30 billion worth of real estate this year.
That should shut up the naysayers.
Finally, there’s the question of financing, which might be the thorniest question of all.
While borrowers chewed their fingernails waiting for interest rates to drop (yes, the Fed did two cuts this year, but rates remain stubbornly high), activity has moved from “completely frozen” to “slowly thawing.”
But, despite all the bellyaching, four billion-dollar-plus deals crossed the finish line. Tishman Speyer managed to score a $3.5 billion CMBS refinancing of Rockefeller Center, Cain International received a $2 billion construction debt package to finish up One Beverly Hills, Gary Barnett received $1.2 billion in refinancing for 50 West 66th Street (speaking of Barnett, he also filed plans to convert the former ABC campus in residential last week), and DFO Management (Michael Dell’s firm formerly called MSD Capital) scored $1 billion for the Boca Raton Resort & Club.
ICSC, ho!
Retail had a somewhat mixed year. But (if we may allow ourselves this) the mood at ICSC last week was reasonably positive.
“New York City has been on a pretty strong upswing,” Brandon Singer, CEO and founder of Retail by MONA, told CO at the conference. “The food and beverage concepts, the digitally native brands are expanding. SoHo is on fire. Williamsburg is on fire.”
Which doesn’t mean that a lot of retailers with a national presence haven’t had to make some tough decisions.
Starbucks, for example, is no longer on an aggressive caffeine-fueled store grab. These days, it’s more into redecorating.
“We are taking a little bit of a pause in reducing the number of new stores and renovations to give us an opportunity to redesign,” the java giant’s Angele Robinson-Gaylord said at a panel.
Macy’s meanwhile is taking a fairly aggressive approach to its excess real estate: It announced that it’s closing 65 stores nationally, and expecting to net some $275 million from their sale.
“We at the start of the closure strategy said we had locations that were less profitable and less productive and we wanted to monetize them as soon as possible,” said Macy’s CEO Tony Spring during an earnings call. “So the fact that we are closing more stores this year is a reflection of the fact that our assets have value, and even in this less stable market we’re transacting.”
Sunday reading
Opinion can translate into data, when the opinion-maker has a big checkbook and is itching to do some deals.
That’s the reason why CO’s Owners Magazine is such a valuable resource. It cuts through the noise and gives you a window into the decision-makers and their plans.
This year we spoke to a stunning array of landlords and developers from Larry Silverstein, to MaryAnne Gilmartin, to Douglas Durst, all of whom offered their opinions on everything concerning real estate.
Some were willing to muse about Eric Adams and his fate. (General consensus: He’s pretty popular among the landlord class. And, although they didn’t know it at the time, they probably approved of his plan announced last week to rewrite the city charter.)
They talked about their biggest expenses going into 2025.
They discussed their eagerness to transact. (Almost everyone polled said that they would be wheeling and dealing in the next 12 months.)
They speculated on the future of interest rates. (Gloomier than we predicted.)
They talked about dipping their toes into different asset classes.
And they conducted a fantasy draft of their colleagues for the incoming Trump administration. (Speaking of which, CO also looked at what Trump 2.0 was going to mean for commercial real estate.)
All in all, it should be plenty to muse on as we head toward 2025.
See you next week!
