Sunday Summary: War, Oil Blockades, Interest Rates — Oh My!

As of yesterday, the United States and Israel entered week four of their conflict with Iran — and there are a lot of nervous people watching and waiting.

On a purely self-interested level, we have to wonder what a global shock like a war and the subsequent closing of the Strait of Hormuz, a chokepoint for the world’s oil supply, will mean for real estate.

“These events are obviously playing on investors’ psyches, but, when it comes back to actual fundamentals in global real estate markets, there are still positive signs,” said Simon Chinn of the Urban Land Institute. “Despite this volatility, many in the industry recognize you can’t just sit on the sidelines. Unpredictability has become the only constant now.”

But this state of mind is contingent on the idea that this conflict remains limited in scope and duration. When the conflict starts entering a full month, or a second month, the effects on the global economy could be drastic. “Compared to U.S. tariff disputes and Liberation Day last April, what is happening at the moment is much harder to switch off,” said Chinn.

Indeed, whether or not the fundamentals remain sound, global volatility was one of the reasons the Federal Reserve cited for pausing on interest rate cuts last Wednesday.

“The implications of events in the Middle East for the U.S. economy are uncertain,” said Fed Chairman (and presidential bête noire) Jerome Powell. “In the near term, higher energy prices will push up overall inflation, but it’s too soon to know the scope and duration of the potential effects on the economy.”

Oh, and speaking of the Fed, the board — along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency — issued recommendations to lighten the capital requirements of Global Systemically Important Banks and of smaller banks that are maybe just as important. Which should be either a nice shot in the arm for the banking industry, or a risky kind of move reminiscent of the days just before the Global Financial Crisis. If unpredictability has indeed become the only constant, we’re just going to have to wait and see.

Looking to the west

West Coast, specifically. Because we saw an awful lot of activity in Southern California last week.

First, if you thought life sciences was dead, the good folks at Irvine-based Praelium Commercial Real Estate are in their laboratory reviving it like it was a character in the latest Frankenstein reboot. (Oh, wait… bad example.) In any event, Praelium plunked down $235 million for a 17-building, 733,497-square-foot office, industrial and R&D portfolio in Goleta, Calif., from Majestic Asset Management, Blackbird Investment Group and H.I.G. Capital.

Also last week, San Francisco-based Prologis and Singapore’s GIC announced a $1.6 billion build-to-suit logistics joint venture targeting properties across the country.

There was also interesting retail and office news in the Golden State.

Despite our best efforts to discourage them, Canada’s Bank of Montreal announced plans to open more than 130 branches in California and another 15 or so in Arizona over the next five years.

Speaking of banks, Bank of Hope took 50,000 square feet at Carolwood’s Aon Center, at 707 Wilshire Boulevard in Downtown Los Angeles as its new headquarters.

While we’re on the subject of Downtown L.A., the City Council approved the mixed-use project proposed by the Walter J. Company and Metro for Centro Westlake, a massive development smack between Wilshire Boulevard, Alvarado Street, Westlake Avenue and Seventh Street in Westlake.

And a huge piece of California retail changed hands when Ben Ashkenazy’s Beverly Connection complex sold to Cedars-Sinai for $269.9 million. Cedars-Sinai is going to use the retail center as part of its medical campus — which is a bit of a shame, because retail is a hot topic lately. Just last week Nuveen Real Estate raised $330 million to go on a grocery shopping spree — grocery-anchored shopping centers, that is.

People moves

Two years after Stellar Management’s Larry Gluck died tragically at 71 from ALS, the firm has finally announced Gluck’s replacement — Matthew Lembo and Ryan Jackson are its new co-CEOs.

“This is a defining moment for Stellar Management, and I’m energized to help lead the firm into its next phase,” Jackson said in a statement. “Matthew and I are aligned in our vision to build on the firm’s strong foundation while pursuing new opportunities for innovation and value creation across the business.”

It was not the only big HR news. Over at JLL, Patrick Murphy (who had been executive vice chairman at Cushman & Wakefield until decamping to JLL in 2023) was named the new head of New York brokerage.

Oh, and Raven Property Advisors hired Jared Sobel away from Walker & Dunlop in an effort to launch a capital markets division.

On and on it went this week. Northmarq bumped up Jeff Erxleben, a 23-year veteran of the company, to president of capital markets. And Matthews hired Clint Olsen from JLL to be its new executive vice president for New York City.

Lease-a-palooza

Industrious was being very…. uh… hardworking last week.

The coworking firm grabbed an additional 240,000 square feet (it had about 51,600 already) at Kato International’s Tower 49, bringing its total footprint to 18 floors at the building!

If that wasn’t enough, the coworking firm announced three more Manhattan leases, including a 43,000-square-foot one at 110 East 42nd Street; a 33,000-square-foot lease for its offshoot, Indy by Industrious, at 609 Greenwich Street; and 24,500 square feet at 156 Fifth Avenue.

But the big mamou of New York office leasing last week would have to be Bank of America’s announcement that it’s upping its footprint at the Durst Organization’s One Bryant Park from 1.8 million square feet to 2.4 million square feet.

Hooray for housing!

Multifamily might have its problems, but the right asset is still very much in demand.

For instance, Harbor Group International dropped $562 million for a portfolio of 11 multifamily assets around the country from AH Realty Trust.

In Coney Island, Brooklyn, Cammeby’s International Group and Rybak Development submitted a rezoning application for a two-building, 703-unit development at 3030 Ocean Parkway and 400 Neptune Avenue.

That last one is a relief. The need for a lot more housing was very much on the minds of the folks who came to Commercial Observer’s Future of New York forum at 10 Grand Central Place on Thursday, an event put on with the Real Estate Board of New York.

“The 485x program does not work,” said REBNY Chairman Jed Walentas, sitting next to Deputy Mayor Leila Bozorg. “Generating a whole bunch of 99-unit projects and having the market decide that that’s what they’re willing to invest in is not a solution for New York City housing. Our industry, with City Hall, with the governor’s office, with the legislature, needs to fix that with organized labor, with all the other constituencies, whoever it is — we need to come up with a program that works.”

Which is not to say that Bozorg or the rest of the administration is oblivious to the problem, or not making an attempt to deal with it. Last week, the mayor’s office announced a plan to fast-track approval of ancillary rental spaces in yards, attics and basements.

And, while you’re in a multifamily mood, we published two interesting stories last week which might keep your eyes away from news out of the Persian Gulf.

The first was a profile of Shlomi Avdoo, the founder of the eponymous development firm, who has built about 2 million square feet of mixed-use real estate and is sitting on another 1 million square feet in the pipeline, including fancy new Upper East Side condos designed by RAMSA.

Speaking of plush Upper East Side condos, did you happen to notice that a penthouse at 1122 Madison Avenue went to contract for a record $89.5 million last month?

The developer of said condo was the founder and CEO of Legion Investment Group, Victor Sigoura.

Sigoura sat down with CO to tell us all about himself and Legion’s future and origins. Makes for an enjoyable Sunday afternoon read.

See you next week!