Sunday Summary: A New Day at WeWork?

The WeWork (WE) story took a turn in the middle of last year when a new leader was named to take over and repair some of the damage the coworking company had endured.

Real estate professionals were as delighted as they were surprised when they heard who: John Santora.

It was a sensible, comforting choice. This was someone who had spent more than four decades at Cushman & Wakefield, serving as the president of the tri-state office. There would be no more international pot-fueled romps, no Run-DMC concerts in the office after firing staff, no millions upon millions of square feet of questionable real estate decisions.

So… how’s it working out for Santora?

All things considered, not bad. Last month WeWork sealed a deal for 112,265 square feet at 5 Manhattan West, which they’re going to manage for Amazon. They’ve been catering to some 220 different AI firms, like C3.ai and OpenAI. And some of the leases that the company is responsible for are finally coming up for expiration.

Santora sat down with Commercial Observer to discuss this and more.

“You would think with all the bumps and bruises that people would have moved on, but the organization is solid from a talent perspective,” Santora said. “And the people love this company — they’re really tied to the brand in many, many ways.”

But we won’t spoil the rest here. Read the whole thing to know how this behemoth of the real estate market is dusting itself off.

Down in the dumps?

There have been a lot of recent reports about New York’s real estate rebound, but one area that seems to be lagging has been Downtown.

While the rest of Manhattan was seeing solid gains in leases and renewals in 2024, Downtown Manhattan actually lost ground, leasing only 2.24 million square feet of space — which was 21 percent less than 2023, according to the Alliance for Downtown New York.

Much of the reason for this has been the fact that the appetite in the market has been for new, Class A office space, and not much that has broken ground Downtown in the last couple of years.

“There’s very little new construction Downtown,” said Lori Albert, director of tri-state research for Cushman & Wakefield. “Of 67 [Manhattan] buildings that were completed since 2017, only six were completed Downtown.”

Yes, there are still leases that are happening (just last week the software company Accrete took 13,757 square feet at RFR Holding’s 17 State Street), but it sounds as if Downtown is hewing closer to the national trends, where office leasing has continued on a four-year slide.

This might explain why — more than in a lot of other areas of New York — Downtown has been so primed for office conversions. In that respect, there are a ton of interesting projects underway, including 25 Water Street, the former home to the New York Daily News and National Enquirer, which is getting a first-rate residential makeover by GFP Real Estate, Metro Loft Management and Rockwood Capital.

Forget office

Retail, on the other hand, has caught not just our attention, but also that of serious investors.

Every week interesting leases pass our desk, like Oiji Stk (run by chef Brian Kim’s Oiji Hospitality Group, which has a Michelin star thanks to Oiji Mi) signing a 15-year, 10,500-square-foot lease at 295 Fifth Avenue; or Crocs leasing a 4,200-square-foot global flagship store at 543 Broadway. (And it’s been reflected in the data. Fashion brands, in particular, caught REBNY’s attention recently.)

Plus, every week we learn of interesting moves within the retail business. Like Kristen Pash upping sticks in London and taking on a new role as vice president at TSCG, to give the brokerage a more national footprint.

But regarding those big investments, one of the biggies plunked down some serious cabbage when Blackstone purchased Retail Opportunity Investment Corporation in a deal valued at $4 billion and consisting of some 11 million square feet of West Coast shopping centers. Moreover, we learned it will be purchased through $2.8 billion in CMBS financing. (And that wasn’t the only multibillion-dollar REIT acquisition last week: Apollo Global Management purchased Bridge Investment Group for $1.5 billion in stock.)

Finally, wellness company Therme Group announced a joint venture with The Georgetown Company to develop spa-like resorts around the United States. Yes, retail is getting fit!

Good earners

February is over, and that means the final earnings calls evaluating 2024 are coming in.

Back in 2023, Howard Hughes Holdings reported a disappointing $83.4 million in net income. But, in their recent fourth-quarter earnings report released on Feb. 26, the company said they had tripled their income in 2024 to $285.2 million — and boasted another $862 million in financings.

This was probably helped by the fact that Howard Hughes spun off Manhattan’s South Street Seaport into Seaport Entertainment in July, and redoubled their efforts on master-planned communities.

Unfortunately, CEO David O’Reilly declined to comment on Bill Ackman’s Pershing Square Capital possibly acquiring the company.

The Paramount Group had a less rosy earnings call. The firm had a net loss of $38.6 million in the fourth quarter and lost blue chip tenants like J.P. Morgan, which is leaving its office at One Front Street in San Francisco, and SVB Securities, which terminated its lease at 1301 Avenue of the Americas.

Finally, Starwood (STWD) had good news to report.

“The company really is in fantastic shape, probably the best shape it’s been in years,” said Barry Sternlicht on Starwood Property Trust’s earnings call. “Look at the balance sheet. … We can easily borrow money and increase our leverage and increase our earnings power, and we’re going to be aggressive on our lending book.”

Starwood originated or acquired some $5.1 billion in assets last year, and raised $3.5 billion in capital, which is a record for the firm.

And, while Sternlicht’s mood was positive, he was not shy in warning of the Trump administration’s proposed tariffs.

“The windshield has never been murkier,” Sternlicht said. “No one knows the effect of tariffs, or if they’ll be targeted or broad, but there’s one short-term conclusion, which is, it’s definitely inflationary.”

Speaking of tariffs…

While the full effects are still unknown, developers and construction firms are starting to take seriously the impact of tariffs on their bottom lines and the way they do business.

“A lot of these heavy infrastructure projects are bid on by price of the contract, and so it just brings uncertainty to the mix,” Margaret Rabba, vice president of engineering and construction at Morningstar, told CO. “I would say contractors are probably taking a deeper dive into their contracts right now and seeing what risk they’ve actually absorbed and what can be passed through. … But we assume that there’s just going to be a lot of renegotiating and a lot of open dialogue with owners, saying, ‘What are we willing to renegotiate here? What’s going to fall on my plate?’ But it is a challenge. There’s not a whole lot of margin in a lot of these projects.”

Of course, construction is not the only apple cart the administration is itching to overturn.

New York’s recently implemented congestion pricing is also on the federal government’s to-do-without list.

If it does scrap it… what happens next?

“There is no Plan B,” MTA Chairman Janno Lieber bluntly declared in an interview last month.

The MTA’s capital plan (which was already not fully funded) will be short an estimated $15 billion.

In addition to the $48 million congestion pricing raked in during its first month, the MTA has claimed that Broadway theater attendance is up 21 percent, restaurant reservations are up 7 percent, and retail sales are up $900 million as a result of tolling most motorists who enter central Manhattan. And there are other quality of life considerations.

People moves

There was a lot of HR activity last week.

First, we learned that Darcy Stacom (the “Queen of Skyscrapers”) and Wendy Silverstein (former CEO of New York REIT and former executive vice president at Vornado Realty Trust) teamed up to launch a new real estate advisory firm called StacomSilverstein.

Joseph Fingerman, who previously headed Signature Bank’s commercial real estate business, left his position as president of Douglas Eisenberg’s A&E Real Estate Finance.

A new president and chief operating officer was named at LeFrak and (surprise!) it was Adam Silfen, who is the first executive appointment to the C-suite from outside the eponymous family.

Sunday reading

Sunday is a time for reading, but it’s also a time to get outdoors and get some fresh air. (We remember our mother telling us that once or twice.)

If you’re in need of a neighborhood to wander in, you might try Dumbo, where Commercial Observer hosted our 2025 Brooklyn Market Forum last Wednesday.

Yes, you won’t be able to see in person speakers such as Brooklyn Borough President Antonio Reynoso, and Melissa Burch, the chief operating officer of the New York City Economic Development Corporation, and Randy Peers, president and CEO of the Brooklyn Chamber of Commerce, and Regina Myer from the Downtown Brooklyn Partnership, not to mention brokers and owners galore like Dan Marks and Miki Naftali….

But you’ll have a beautiful Brooklyn waterfront to enjoy.

See you next week!