Sunday Summary: Power South Florida Is Back, Baby!

So, grab yourself a glass of orange juice and kick off Sunday morning digging into all the movers and shakers that made South Florida an outlier market in 2023. From condo developers to brokers to lenders to restaurateurs and politicians, there should be plenty of familiar faces — and several new ones — on the list for anybody working Miami and its environs.

There’s more to just the list, too. You can also read about the challenges facing Miami’s multifamily market as the sector moderates; a series of bills making their way through the Florida legislature to relax child labor laws; and a Q&A with BGO’s co-CEO John Carrafiell on how his firm has been using data science.

Plus, if you need a break from reading, we have a podcast for you with our intrepid editors and reporters going over the makings of the power list.

AI will save us all?
We’ve seen stories about the fears of artificial intelligence replacing jobs (which might have already started) and about one chatbot even trying to replace a human in the most sacred of institutions: marriage.

But at least the possibility of a robot uprising might bring some good news to the battered office market in the meantime.

AI firms have been hunting for a lot of office space — with OpenAI recently entering the market for 60,000 square feet in Manhattan — and some have already committed to large footprints.

The aforementioned OpenAI signed San Francisco’s largest lease in the fourth quarter of 2023 with its commitment to 486,600 square feet at 1455 and 1515 Third Street. The second-largest deal that quarter was also an AI firm, with startup Anthropic signing on for 230,315 square feet at 500 Howard Street.

“No one can predict the future, but if investment continues to grow in the AI space, there’s no reason to believe that Wall Street won’t help it expand its markets just like other tech users have,” Colliers (CIGI)’ Derek Daniels told CO. “The industry grew from Silicon Valley and expanded into other markets. The Bay Area is currently the home of AI, but there’s no reason to believe it won’t expand outside.”

And New York has already started to see some of that action, with AI video creation and editing firm Captions taking 15,505 square feet at 71 Fifth Avenue.

While AI hunts down new office space, a tech giant opened a new one.

Google (GOOGL) cut the ribbon on its new St. John’s Terminal office in Hudson Square, which it dropped $2.1 billion to buy in April 2022. The 1.7 million-square-foot space will house 3,000 employees and it’s meant to reflect the search giant’s commitment to the Big Apple. (Including a nod to every New Yorker’s favorite drinking vessel, the Anthora to-go coffee cup.)

And the office market could use some uplifting news. A new report found that office real estate values and asking rents slid even further last month, forcing deep discounts and leading to fewer transactions.

The average value for U.S. office property was down at least 25 percent annually, too,  while January saw $1.52 billion in office sales close for an average price of $195 per square foot. By comparison, January 2022 had $1.93 billion in office trades at $202 per square foot.

At least we still got some deals
Even with the struggling commercial real estate market, there have been some deals crossing the finish line.

Sol de Janeiro signed a 57,203-square-foot lease at One Grand Central Place to move from 551 Fifth Avenue; Selfhelp Community Services took 45,689 square feet at 1180 Avenue of the Americas; and Greek restaurant Avra Estiatorio will open its fourth location after inking a deal for 20,000 square feet at 390 Ninth Avenue.

On the financing side, Northwind Group provided $111 million in takeout financing on a Houston luxury condominium property, and Argentic Investment Management provided $65 million in acquisition financing for a central Pennsylvania industrial property.

There were some sales, too, as Madison Realty Capital bought a Flushing, Queens, commercial property for $80 million, and New American Funding picked up an Orange County, Calif., office building for $31 million. (Those weren’t all rosy, as Madison got the property from a bankrupt developer and the California spot sold for 42.5 percent less than it did in 2019.)

If those rundowns of deals have you wondering if you could just see them all in one place, do we have news for you. CO recently launched a Deals of the Week newsletter that covers the top leases, financings and sales on a, well, weekly basis.

Earnings season continues
The reporting of fourth-quarter 2023 earnings kept rolling this week.

First up, Cushman & Wakefield (CWK) reported a 6 percent decline in annual revenue — blaming double-digit annual drops to its leasing, capital markets and valuation businesses — while its earnings before interest, taxes, depreciation and amortization fell 35 percent compared to 2022, ending 2023 with $570 million.

Rival brokerage Newmark (NMRK) had a bit of a happier earnings call. Bolstered by big-name hires and the $50 billion Signature Bank portfolio loan sale, Newmark saw its quarterly revenue increase 23 percent to $747.4 million. Its fees from servicing grew 19.4 percent quarter-over-quarter while leasing revenue increased 19.6 percent in that time.

Meanwhile, Empire State Realty Trust saw some changes to its executive team before its earnings call. The landlord promoted Chief Financial Officer and Chief Operating Officer Christina Chiu to president, taking over the role from Chairman and CEO Anthony Malkin.

In her place as CFO will be Stephen Horn, ESRT’s chief accounting officer, while the COO role will be “extinguished” for now, Malkin told CO. The moves come amid big turnover in the real estate industry’s executive ranks, but Malkin emphasized that that isn’t the case at his company and his executive team is sticking around.

With that, we’re signing off. We’ll see you in the pool, in the clubhouse, and all over that shuffleboard court.