Sunday Summary: Yule Not Believe the Vibes! 

Christmas is Wednesday, and that means families, carolers, presents, and last-minute real estate deals made before Dec. 31.

At least that was the impression we got last week.

First up, Haddad Brands, the children’s apparel company, bought itself an exceptionally elaborate present: a 1 million-square-foot office property at 2 Park Avenue from Morgan Stanley (MS).

But even more shocking than the square footage Haddad just inhaled is the price the company got for the property: $360 million, working out to $360 per square foot. (For Park Avenue?!)

It’s a reminder that despite the optimism and activity that we’ve seen over the past few months, sales are picking up again because prices have come down. A lot. Many loans are still underperforming, or worse, like the $343 million in troubled loans that Flagstar Financial (formerly New York Community Bank) is looking to get off its books, or RFR’s loan at 188 East 78th Street, which is facing foreclosure.

Likewise, despite the good vibes in retail, some of the numbers at New York’s big chains were less stellar than expected, with chain stores’ footprint decreasing this year 1.3 percent (the fifth time that’s happened in the past seven years), according to the Center for an Urban Future.

And, while Jerome Powell gave us what we thought was a sweet treat last week in the form of a new interest rate cut, it was covering up a bitter pill: a warning that he wasn’t going to be cutting rates as much in 2025 to head off inflation.

“With today’s action we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive,” Powell said after the decision had been announced. “We can therefore be more cautious as we consider further adjustments to our policy rate.”

And, even as Commercial Observer has been giddily reporting some of the big leases and sales of the year in New York (did we mention Taconic Partners sold a pair of office condos in Essex Crossing for $221.6 million to Deutsche Bank (DB)?), it’s important not to mistake Gotham for the nation as a whole.

Last week Yardi Matrix released its end-of-year report indicating that the sales price of office deals declined 9 percent from 2023, and vacancy rate was 19.4 percent — which is actually 120 basis points higher than it was a year ago.

All I want for Christmas is “AI, AI, AI …”

We imagine that the tots will be requesting something electronic from Santa. (We hear that College Football 25 is popular with the youngins.)

And for some of the older kids the word for Santa is AI.

“AI, AI, AI,” Kat Lau of storage company Stuf said in an email when asked about what to expect in 2025. “It’s widely known as the biggest thing since the internet, and it has already emerged as an essential tool in commercial real estate. From my experience working with owners and operators, I’ve seen the more forward-thinking groups using AI to handle one or two specific tasks, and it’s saved them hundreds of hours of time.”

There will be other changes in proptech, too.

“In real estate tech, I think the biggest opportunity is for the customers to drive the change, and we see it as a cultural shift,” said Casey Berman of Camber Creek, a venture capital firm that specializes in proptech.

“The companies that will be successful in `25 are the ones that have a direct impact on a property level net operating income, either by revenue expansion or generation, or operations and expense management,” said Dan Wenhold of Fifth Wall, another VC firm. “We’ve seen this in multifamily, in commercial [office], and I think there’s going to be a real refocusing and sharpening of the pencil around companies that are serving this. It doesn’t necessarily mean that it’s going to be only software that will do this, or only fintech. I think there’s actually gonna be a combination in a lot of cases of software, plus some tech-enabled services.”

We probably don’t need to tell our readers that tech firms have been stocking up on space in the past few months. Established firms like JLL (JLL) are hiring experts such as Justin Bedecarre and Felipe Gomez-Kraus who specialize in helping such firms capture this valuable sector.

“I would posit that it’s a risk for a quote-unquote legacy firm to not try to innovate and meet the continued demands of companies that are digital first or digital native,” said Bedecarre in his recent interview with CO, “and that are all feeling the impacts of technology writ large, including that of AI.”

In fact, there’s not enough space for the heavyweights! Amazon abruptly backtracked on its return-to-office mandate for 2025 when the company found it didn’t have enough deskage to accommodate everybody. (Now that’s some lucky landlord’s Christmas present!)

Cozy and warm by the fire — or by the beach

There were some interesting sales and loans in warmer climates as well last week.

The big deal of the week was Whitman Family Development nailing an additional $190 million in construction debt to expand Bal Harbour Shops from Blackstone’s debt strategies division, known as BREDS. That brought the total financing on the project to a whopping $740 million.

Blackstone was busy last week (as it always is), specifically in South Florida, selling a four-building industrial complex called Ironwood Commerce Center to TA Realty for $160 million.

But it wasn’t all Blackstone business in that area. Paul Singer’s Elliott Investment Management plunked down $52.5 million for The Gates Hotel South Beach in Miami Beach.

Oh, and Jonathan Landau’s Landau Properties and partner Taubco nabbed a $74 million construction loan from 3650 Capital, formerly 3650 REIT, for a 126,000-square-foot office they’re planning at 9551 East Bay Harbor Drive in Bal Harbour.

Finally, the grocery chain Publix spent $40 million for a strip mall at 12800 Biscayne Boulevard in Miami-Dade County where it’s already the anchor tenant.

But that’s just the Sunshine State. There were interesting things happening in sunny California as well.

We learned that Donald Bren’s Irvine Company filed plans to convert office space at its four-building MacArthur Court in Newport Beach into apartments.

In Duarte, Calif., the cancer treatment and research center City of Hope bought a four-story building and 52 acres of land adjoining its Lennar Foundation Cancer Center for $88.5 million from the developer FivePoint.

Millon Dollar Baby

Before you make the last-minute run to the store for presents and eggnog, settle in and read our interview with CBRE (CBRE)’s James Millon, the man whose team has had a hand in some $47 billion worth of transactions since 2016.

When you hear a figure like that, it will put that $200 Nintendo Switch your son wants in perspective.

Happy holidays!