Sunday Summary: Midtown Is Back, Baby!

Exhibit A: Rents.

According to the latest from CBRE (CBRE), asking rents in Midtown stood in September at an extremely respectable $87 per square foot. (Manhattan overall is $77.86 per foot.) But, if you’re talking about the Plaza District, Hudson Yards, or Fifth, Madison and Park avenues, that number rises over $100 per foot. Which is amazing.

Exhibit B: Vacancy.

Park Avenue’s availability rate stands at 7.6 percent. The Plaza District is at 13.8 percent. Given that some markets like Chicago had a 23.6 percent vacancy rate when we checked last month, these are damn good numbers.

“Leasing activity is up 25 percent from a year ago,” said Avison Young’s Danny Mangru, “and we’ve witnessed the first quarter of sub-19 percent availability rate since Q1 2021.”

Exhibit C: Bosses are refusing to take any more crap from WFH stalwarts.

“The work-from-home, hybrid trend in New York City is irrelevant,” said Cushman & Wakefield (CWK)’s Mark Weiss. “It’s gone. Companies are expanding again, and we are seeing [rents] 20 to 25 percent higher in price. Anyone who thinks that workers working from home aren’t looking to be fired is kidding themselves.”

Of course, not all of the recent good news is Midtown-centric. Last week, Google (which, if its $2 trillion valuation earlier this year means anything, certainly doesn’t have to worry about its real estate costs) renewed the 300,000 square feet it currently occupies at Vornado Realty Trust (VNO)’s 85 10th Avenue in Chelsea.

And leasing in general has been robust. The week before last we counted at least three leases that broke the 100,000-square-foot mark, only one of which was in Midtown.

And it was more of the same this week. While Google was the only lease in that six-figure realm, Primark signed a lease for 78,760 square feet at 150 West 34th Street (another Vornado property); the Brooklyn DA’s Records Management Division took 52,025 square feet in Brooklyn’s Industry City; and Path Entertainment Group snagged 49,982 square feet at SJP Properties’ 11 Times Square to build an immersive “Monopoly” experience. (Yes, the Monopoly board game. With “Rich Uncle Pennybags” and everything.)

(While you’re mulling these various deals, it would be worth taking a look at this week’s profile of Jonathan Kaufman Iger, who is the grandson of one of Midtown’s storied owners and who is now heading up Sage Realty.)

Retail is back, too, baby!

Anybody in CRE is quite familiar with the term “retail apocalypse.” This had been in the real estate vocabulary long before the pandemic, when the full effects of companies like Amazon and Walmart began being felt in the 2010s, and had kept retail confined in one of those buckets that’s written off as a not-very-good investment.

We’re calling bull-spit on this. (We’re a family newsletter.)

According to a recent report from JLL (JLL), the retail vacancy rate in New York City’s six major business districts was 14.7 percent. Back at the height of COVID, the vacancy rate citywide peaked in 2021 at almost double that figure — 28 percent!

And with Placer.ai reporting an uptick in retail foot traffic during Mother’s Day, Labor Day and Memorial Day this year, retailers are already bracing themselves for a busy holiday season.

“Brands will try to get customers to buy earlier in the season, especially with the tighter Thanksgiving-to-Christmas calendar,” said Soozan Baxter, of the eponymous Soozan Baxter Consulting. “Retailers have learned to adapt to supply chains better, and the days of being very promotional [or] last-minute slashing of prices are starting to dwindle, and, as a result, last-minute shoppers may find that inventory is a little tighter.”

Indeed, aside from the Primark and Monopoly leases, we saw pilates studios, trading card companies and banks signing leases last week.

And investment sales? And lending?

They had a pretty good week, too.

To take the big kahuna first: Strategic Hotels and Resorts scored a $1.58 billion refinancing of nine luxury hotels throughout the country, the biggest being Miami’s InterContinental.

Speaking of South Florida, in Brickell, Nuveen Real Estate sold 701 Brickell for $443 million to Morning Calm Management, which made it the second-largest office sale in Miami history.

Henderson Park is apparently spending $425 million to buy the PGA National Resort in Palm Beach Gardens, Fla., from Brookfield Asset Management, which would be the largest hospitality deal of the year so far in South Florida.

Oh, and Grupo Hotusa picked up a 71-key Art Deco hotel designed by Albert Anis at 1400 Ocean Drive for $19.7 million.

In New York, the Vanbarton Group is laying out as much as $100 million to purchase the former offices of the Archdiocese of New York at 1101 First Avenue for conversion to residential — and, if there’s one thing the Archdiocese knows about, it’s conversion.

Kushner Companies sold off $37.9 million worth of residential property in the East Village at 329-335 East Ninth Street and 516-518 East 13th Street to JSB Capital Group, Holliswood Development and Edifice Partners.

In Newark, Tona Development Group and KS Group secured a $62.2 million bridge loan to refinance a 15-story multifamily property they’re constructing at 50 Sussex Avenue.

Even Meridian Capital is out of the doghouse with Freddie Mac, after having been banned from doing business with the government-sponsored enterprise for some allegedly fishy deals tied to a Meridian broker.

Is there nothing bad to report?

Slow your roll, slick. Of course there’s bad stuff to report.

While New York and its Midtown might be thriving, it’s a different story out in Southern California.

Investment sales in L.A. County are down 18.4 percent year-over-year from the first three quarters of 2023 — despite the fact that Jeff Sagansky is reportedly flirting with the idea of buying the Oscars-hosting Dolby Theatre.

Even in ritzy Beverly Hills, hotels like Sixty Beverly Hills are going back to their lenders for extensions on their plush properties.

And the New York mayor’s commercial real estate decisions are now in an unwelcome spotlight, with Manhattan DA Alvin Bragg announcing yet another investigation into Eric Adams.

Good / bad

One asset that seemed to slide a bit in 2024 was proptech.

“The last year has been a very, very tough year for the industry,” said Cherre’s L.D. Salmanson. “And, as a result, it’s also been a very difficult year for technology companies trying to sell into the industry in one of the toughest real estate and financial climate environments in history.”

That being said, those proptech companies that survived are the ones whose products are more coveted and with business plans a lot sturdier than the rest.

For that reason, it’s worth perusing Commercial Observer’s Power Proptech 2024 list of the best names in the industry who have managed to get through the rough period amid predictions of a return to some semblance of normalcy in 2025.

See you next week!