Sunday Summary: Our Inner Jerry Seinfeld Is Calling

What’s the deal with NYC office building sales, amirite?

Despite the fact that interest rates remain stubbornly high, despite the worrying sign that retail is flashing red (thank goodness Oasis is on tour), and despite the uncomfortable data that New York apartment construction has fallen off a cliff (a 67 percent decrease from last year, per CoStar), office sales seem to be pretty good.

In the last few weeks, we’ve been noticing some true blockbusters. Silverstein Properties and the California State Teachers’ Retirement System sold off 1177 Avenue of the Americas for $571.1 million, for one; Cohen Brothers Realty sold not one but two properties at 623 Fifth Avenue and 3 East 54th Street for $218 million and $188 million, respectively.

Even the lower-than-nine-figure deals have been coming fast and furious, like the German investor Pamera North America buying 640 Broadway from Acadia Realty Trust for $49.5 million.

JLL puts the transaction volume at 130 percent higher than this time last year.

So, why all the activity?

It’s probably traced back to solid office leasing. “This is the capital markets starting to wake back up and pursue office because the fundamentals are so strong,” said JLL’s Drew Isaacson. “At a fundamental level, the properties are performing incredibly well, because the leasing market’s performing incredibly well.”

Indeed, just last week Commercial Observer reported that Industrious had picked up three Manhattan locations; MSQ Partners has picked up 38,273 square feet at 50 West 23rd Street in the Flatiron District; and, even though it’s not a done deal yet, Simpson Thacher & Bartlett (the legal behemoth) is toying with taking 700,000 square feet at Extell Development’s mixed-use project at 570 Fifth Avenue.

No wonder a global fast-food behemoth like Mixue Ice Cream & Tea is opening in Manhattan, as is Luckin Coffee — retail difficulties be damned!

What’s the deal with residential?

Of course, apartment construction might have fallen off a cliff, but, if anything, that makes the existing residential even more valuable. And it’s not like nobody is building anything.

In Downtown Manhattan, The Rabsky Group convinced G4 Capital Partners and Galaxy Capital to loan them $320 million in construction financing for its planned 280,000-square-foot condominium at an assemblage at 65 Franklin Street, 59 Franklin Street, 112 Fulton Street and 356 Broadway in Tribeca.

Benchmark Real Estate Group plunked down $66 million for a building that features 121 apartments (and three retail spots) at 250 West 85th Street from Heller Realty.

And, down in Boca Raton, Mill Creek Residential and Group P6 secured a $100.9 million construction loan for a 12-story, 304-unit rental at 400 South Dixie Highway.

“We’ve seen 25 percent rent increases on the median one-bedroom monthly rent in Menlo Park,” said one guy who is making a big bet on residential — Cyrus Sanandaji of San Francisco-based Presidio Bay, whom CO sat down with when he was in New York last month. “Multifamily has been structurally undersupplied for so long that you’re going to see the limits hit. In terms of vacancy rates, they’re going to drop substantially back to pre-2020 levels in a very short period of time.”

Sanandaji’s whole story is worth reading here.

What’s the deal with prison development?

A lot of other asset classes have been chugging along. Industrial, for example. (Just this week Starwood Capital Group nabbed $930 million in CMBS money to refinance 54 industrial properties across five different states.)

While we’d be wary of saying just how healthy hospitality is, it’s not as though deals aren’t being done there, too. (How lucrative? Well, Blackstone still won’t reveal how much it’s paying for the 352-key East Hotel in Miami’s Brickell City Centre. So maybe very lucrative.)

But one booming asset class that wasn’t on our bingo card (and maybe should have been) was prisons.

One of the provisions in the Trump’s administration’s One Big Beautiful Bill was a staggering $45 billion for detentions through 2029, and Immigration and Customs Enforcement (ICE) plans to double its detention capacity. This has meant big money for companies like GEO Group and CoreCivic.

But we can’t end our week on such a dour note. Instead, read all about what the mandarins of commercial real estate said at Commercial Observer’s first-ever National Institutional Investor & Private Equity Forum. Or read about how the recovery is going in Los Angeles since wildfires swept through the area at the beginning of the year.

Now, stay inside and get some fresh air.