Commercial Real Estate
Can big tech float NYC’s struggling leasing market?
Discount retailers are pandemic winners, as big chains shutter
Inside NYC’s new high-tech, COVID-19-proof office towers
NYC offices are going to look like your apartment when you finally go back to work
Commercial sales slumped in 2020 as quarantines crushed the global markets. Nevertheless, some savvy firms were able to carve out deals.
The redevelopment of 410 Tenth Ave. was the largest building sale completed in December. SL Green Realty sold the property to 601W Companies for $952.8 million, equal to $1,742 per square foot through Darcy Stacom, chairman of CBRE. Its reconstruction is now under way to accommodate tenants including Amazon and First Republic Bank.
Stacom is also finalizing a second round of bids for 325 Hudson St., a data-driven tech building at Vandam St. in Hudson Square that offers tenants access to 40 networks, five sub-sea cable systems and a meet-me room.
Still, deals were few and far between last year and Stacom, like the rest of her industry, is looking forward to seasonal changes and a vaccinated workforce.
“There will be a better reaction in better weather,” she said of her sales offerings, noting that most owners are still waiting for the market fundamentals to work themselves out.
But for cash-rich investors looking to use the slump to beef up their portfolios there’s plenty of pickings. For instance, Douglas Harmon, chairman of commercial real estate titan Cushman & Wakefield, is listing an office building at 1825 Park Ave. in an active area of Harlem on behalf of Savanna that is expected to fetch around $75 million.
Development sites, multi-family and industrial properties are also seeing traction, thanks to a pandemic-induced surge in internet sales and the resulting influx of home deliveries.
“Everyone wants industrial and everyone likes apartments,” Harmon said, pointing to the $424 million sale of a residential project at 265-275 Cherry St. from CIM to Related based on Section 8 affordable rents since the cash flow can be predicted.
“If you believe in the long-term opportunities of New York, it may be the time to buy a development site,” added Woody Heller, vice chairman and co-head of capital markets at Savills, a global real estate services provider.
One such site is in the Financial District at 8 Carlisle St. at the corner of Washington Street, which is being offered by a commercial brokerage Marcus & Millichap team led by Eric Michael Anton, senior managing director.
Expected to fetch around $100 million, it includes planning approvals for a 50-story residential building of nearly 400,000 square feet.
“It’s a sexy site and has incredible views of the bay and city,” Anton said, expecting it will be sold to one of the city’s local builders.
Anton’s group is also offering a stake or recapitalization opportunity for the updated 541-room, French Renaissance-style Martinique Hotel that sits on leased land at 49 W. 32nd St. by Broadway and Herald Square.
“It’s in walking distance of everything,” Anton said, adding the block is filled with open restaurants. Since there are several restructuring options it is difficult to price.
Pricing is, in fact, one of the biggest issues the industry is facing right now for most assets, both brokers and investors said, as the market has created so many unknown factors.
“Now that sublease space is a third of the office leasing market, its impact on values is yet to be determined,” said Harmon.
In fact, the lack of transparency in the market is leading many building owners to hold their properties off the market. Harmon added that most owners are instead triaging their portfolios and figuring out how to refinance during this low interest environment.
Many funds also have the option to wait another year or two before listing a building, he said, so while there is demand and money on the sidelines, many are in a wait-and-see mode.
Among those looking at potential transactions is Nelson Mills, president and CEO of Columbia Property Trust.
“It’s hard to underwrite the true value of a property because of net effective rents,” he said, referring to the true income when free rent and work allowances provided to the tenants are factored in. “We are being patient and disciplined.”
Savanna is also poised to make some investments and loans.
“Owners who have the courage and conviction to invest in the city during times of crisis have historically been well rewarded as the market recovers,” said Nick Bienstock the co-managing partner of the private equity firm. “During the last crisis, we acquired about 4 million square feet of real estate in New York City and we would love to equal or exceed that over the next two to three years.”
“Everyone wants industrial and everyone likes apartments.”
Douglas Harmon, chairman of Cushman & Wakefield
In a retail deal that closed in 2020, SL Green sold the 29,000-square-foot retail condominium in the base of 609 Fifth Ave. at East 49th Street for $168 million through Stacom at CBRE. As it is fully leased with the majority to Puma and the remaining 5,000 square feet to the luxury apparel company, Vince, she called it “more of a coupon clipper,” where the buyer merely collects rent payments.
Similarly, in January, KBS Funds closed on the $12 million purchase of a 3,086-square-foot retail condominium at the base of a new residential building in Tribeca. The space is now long-term leased to Time Warner for a Spectrum consumer site and was marketed by Anton’s group at Marcus & Millichap.
Calling for June 6 to become Downtown Day as a target to return to work, Anton predicted, “values will be low for quite some time but transactions and activity will return and restaurants will be open and everything will be much more normal.”
American Ventures’ chief Philip Blumberg, who is launching a $1 billion fund to buy distressed assets said: “I see this impending market as a buying opportunity.”
Share this article:
Source: Read Full Article