December 2020 » Market Analysis » NY New Developments

December 2020 New York New Developments

New York New Developments

The planned redevelopment of the Grand Hyatt Hotel could consist of a supertall tower rising more than 1,600 feet. The development at 109 East 42nd Street is tentatively called the Project Commodore. The proposed building would have 2.1 million square feet of office space, a 500-room hotel, around 10,000 square feet of open-air public space with 43,370 square feet of retail.

Vornado Realty Trust has suspended its efforts to sell two office towers that it co-owns with the Trump Organization. They had been looking for a buyer for its 70% stake in the buildings, located at 1290 Sixth Avenue. Vornado was hoping to sell the properties for about $5 billion but could not attract buyers at that price, so they stopped the sale.

Delinquency rates on commercial property taxes have increased by about 50% since last year.

Commercial properties including retail spaces, offices and factories were the most behind on their tax bills, with a 3.6% nonpayment rate on the first tax deadline in July. As of Oct. 15, the number of properties in arrears rose to 4%.

A new forecast projects New York’s tourism industry might not recover from its pandemic-related woes for at least four more years, dampening hope that the hospitality sector will stage a rapid recovery when a coronavirus vaccine arrives. With the lack of tourism and Covid-related restrictions, many restaurants and hotels may close down permanently.

Many property owners in the area may soon be presented with an opportunity. The city is seeking to rezone 56 blocks across Soho and Noho, which would lift restrictions on retail and residential use in the area. The City Planning Commission has identified 27 sites that could be developed over the next decade, netting 1,683 apartments (with as many as 494 deemed affordable), 57,473 square feet of retail and 19,598 square feet of community space.

In New York City, mass transit ridership is down 70% from a year ago (even though studies have found a low risk for Covid-19) and only 13% of workers have returned to the office.

Apple has inked a deal to expand its offices at Vornado Realty Trust’s 11 Penn Plaza. Now, Apple has added two additional floors to its lease, bringing its total occupancy to 336,000 square feet. The tech company’s offices will span the ninth through 14th floors. At 450 West 126th Street in Manhattanville, Janus Property is planning a 350,000-square-foot life science hub.

At 125 West End Avenue, Taconic Partners and Nuveen Real Estate are converting a former Disney-owned ABC campus into a 400,000-square-foot research center.

At 30-02 48th Avenue in Long Island City, Alexandria Real Estate is planning to turn a building once used for book binding into more than 175,000 square feet of laboratory and office space.

Asking rents for lab space have been steadily rising, hitting an average of $95.39 square foot across the city in the first half of 2020, up from $88.72 at the year end of 2019. Meanwhile, available lab space for immediate occupancy remains scarce, at over 2%.

Real estate stocks are having sustaining gains made after Pfizer announced successful trials for its Covid-19 vaccine. Some of the country’s largest property owners had their best week of trading, with share prices rising more than 20%, substantially outperforming major indexes.

WeWork is still losing money but is hoping changes in the office market will fall in their favor. It’s spending is slightly less than it was in the second quarter. Member retention has improved.

Deutsche Bank has sent its American investment bankers home as the pandemic has intensified. In New York, only 13% were at their desks.

Some tech companies have considered pay cuts for workers who choose to live in more affordable areas while they work remotely.

The third quarter of 2020 was another slow one for commercial real estate lending, with the pace of commercial loan closings down 28% from Q2 and down 39% year-over-year.

As Manhattan’s office landlords struggle to get people back to the workplace, the city’s biggest provider of in-person meeting spaces and conference centers has scaled back. Convene has closed three of its New York City locations, or about a fifth of its portfolio in the city. The three meeting spaces at 780 Third Avenue, 730 Third Avenue and 810 Seventh Avenue shut in mid-October. That brings the company’s footprint to 11 locations in New York and 30 in total.

Thor Equities’ troubles at 597 Fifth Avenue are mounting. The firm’s $105 million commercial mortgage-backed securities loan tied to the Building has gone into special servicing. They have not made a loan payment on the 86,000-square-foot building since July.


The travel industry has been ravaged by the coronavirus in New York City. If half of the city’s 640 hotels survive, it would be a good outcome. Occupancy rates in hotels that remain open are still far below normal. In September they were 20% lower than the same period last year. In April, hotel occupancy was 60% lower than during the same period in 2019.

The de Blasio administration is giving up its plan to require special permits for new hotel construction in Union Square but it remains committed to studying if a mandate would work citywide. As part of broader rezonings, special permits for new hotels are now mandated in Midtown East and the Garment District. Developers in light manufacturing zones have also had to obtain special permits.

The city’s hotels have seen occupancy rates plummet as many have been forced to permanently close. Last month, hotel occupancy was less than 40%.

Hotel owners in New York City are on the hook to pay more than $500 million. About 200 hotels in the city are operated by unionized workers so under the ruling, owners of about 75 of them are responsible for severance payments.

The city’s hotel occupancy level is less than 40%. The occupancy rate, however, would have been even lower if hotels did not have agreements with the city to house the homeless. As many as 20% of the total hotel rooms in the city may never reopen.

At the end of October, more than 1.3 million residents were collecting unemployment benefits and the city’s unemployment rate jumped to 14.1%.

More than 80% of hotels in the city are backing CMBS loans, equivalent to $3.1 billion, and are exhibiting signs of strain due to the pandemic, more than the national average of 71%.

Among the struggling hotels are the Hilton Times Square, which closed permanently, while leaving a loan that was more than 90 days past due. The Trump International Hotel at 1 Central Park West is also facing trouble. A $6.5 million mortgage on the hotel is now on the watchlist of troubled loans.


Union Square Hospitality Group has suspended indoor and outdoor dining at it’s Union Square Cafe, Gramercy Tavern and Blue Smoke Battery Park City.

As Macy’s grips with a net loss of $91 million in the third quarter, the brand is reimagining future business. One possible way is fulfillment centers. As two of its stores closed in-person shopping, they were converted to processing centers.

Whole Foods is testing out dark stores as it’s shoppers avoid in-person retail due to the pandemic.

Amazon Logistics has inked a new 211,000-square-foot lease to open a delivery station in East New York in Brooklyn. Amazon’s lease is for adjacent warehouses at 12555 and 12595 Flatlands Avenue. Amazon has been on an expansion spree in New York and have inked deals for five additional stations in Brooklyn, the Bronx, Rockland County and Westchester County.

Ralph Lauren has subleased its Fifth Avenue location to Mango. Mango agreed to lease the 28,300-square-foot store at 711 Fifth Avenue and pay $5 million annually, less than 20% of the more than $27 million per year that Ralph Lauren pays to occupy the space.

Asking rents across Manhattan’s 16 main shopping corridors fell 12.8% from a year ago to $659 per square foot in the third quarter. That’s 4.2% below the second quarter and the lowest level since the back half of 2011.

Ground floor rents on Fifth Avenue used to be more than $3,000 per square foot in some cases but today taking rents are more like one-third of that, in some cases less.

As restaurant owners struggle for customers amid the continued coronavirus restrictions, Automat Kitchen Shop is updating the automat where meals are served to customers via vending machine-like lockers.

Despite the return of indoor dining, restaurants are still struggling to make rent. 88% could not pay full rent for the month of October.

Some restaurants have been able to make new arrangements with their landlord. 41% have had rent waived, with 68% of those seeing half or more of it waived. 33% have received deferrals.

A U.S judge approved a deal to allow J.C. Penney to emerge from bankruptcy, Simon Property Group and Brookfield Asset Management will acquire the struggling retailer for around $1.75 billion in cash and debt. The deal will allow a group of lenders to forgive $1 billion in debt in exchange for 160 properties and six distribution centers.

After a few rocky months, rent collections at national chains are leveling out. Major chains paid 89% of October’s rent, the highest since the start of the pandemic, and a slight increase from 87% collected in September.

The increase in rent payments is a continuation of the progress that landlords have been seeing over the past few months. While declines in rent payments were expected, after various forms of rent relief expired for retailers, no such trends have occurred yet.

Retailers whose shops are located within the New York City subway have returned to one question since the pandemic how to survive? Since March, 77 of the 321 retail businesses that operate underground have permanently closed.

Restaurants and retails have been struggling during the pandemic, with capacity rules and fears of contracting the virus keeping customers away. For subway retailers, that’s compounded by fewer people using mass transit: Ridership cratered after the pandemic hit in March, and as of early November, it’s still down 70% below normal 2019 levels.

Le Pain Quotidien will open 10 new locations in New York City. The new stores will open in stores that previously operated as Maison Kayser locations. Both brands filed for bankruptcy during the pandemic and were subsequently acquired by Aurify Brands.

Developer Tishman Speyer is moving ahead with its long-planned renovation of the ice skating at Rockefeller Center complex’s plaza and the underground shopping concourse.

Foot traffic to stores on Black Friday was half of what it was last year. Spending did outpace foot traffic, since shoppers purchased at the stores they visited.

Target is opening another location in New York City. The retailer has signed a lease at 258 Eighth Avenue, currently occupied by a bankrupt New York Sports Club. Target will take a 28,000-square-foot retail space at the base of a to-be constructed mixed-use rental building.

Target is planning to open 15 stores across New York state, including locations in Yonkers, Times Square and Washington Heights. The retailer has seen a record year amid the pandemic. The company plans to open up to 40 stores a year moving forward.

Although pop-ups have existed for a while, some landlords have been wary of short-term deals. However, many are more willing as vacancies proliferate and a second wave of Covid threatens the market. Pop-ups have become increasingly popular.

Banks are rapidly shrinking their retail real estate footprint by closing branches. More than 100 bank branches have closed or are set to close across New York City.

Home Depot has signed a lease to take over a 120,000-square-foot location at 410 East 61st Street, which is currently leased to Bed Bath & Beyond.

As restaurants and other retailers struggle to find their footing in Covid, with thousands closing permanently, leasing challenges are taking a toll on Manhattan’s retail market.

Active retail leasing volume for the 12 months ending in September totaled 2.67 million square feet, down nearly a third from the 3.9 million square feet from the same time period a year ago. Asking rents across Manhattan’s 16 main shopping corridors have fallen to $659 per square foot during the third quarter, down 12.8% from the same time last year, and the lowest level since 2011.


New York is seeing fewer employees return to the office than other major cities across the U.S. In New York, that number was just 13%.

Knotel once hoped to be the next WeWork but as the pandemic rages, it’s facing similar outcomes as its co-working rival. The flex office provider is looking to cut 60% of its 4.8 million-square-foot global portfolio, and slash its leases in the U.S. and Canada from 3.4 million square feet to just 500,000 square feet.

WeWork has recently moved to threatening non-paying members with collections letters.

Breather is considering a possible sale or capital raise. The flex-office industry has suffered as employees continue to shun physical workspaces in favor of remote working. As a result, revenue has dropped by as much as 60%.

A pattern has emerged among office landlords reporting their third quarter results: The majority of tenants kept up with rent payments, but an equal number also kept their workers away. Investment firm and REIT executives reported strong rent collections across many of their office portfolios, a positive sign for their immediate bottom line.

While the offices may be empty, office tenants are paying their rent. Out of eight landlords reviewed, seven had rates of 95% or higher paying their rent.

Boies Schiller Flexner may scale down its offices at its new tri-level space at 55 Hudson Yards. The firm is looking to possibly sublease the space.

Uber is looking to cut its lower Manhattan office space by more than a quarter. The company is offering about 80,000 square feet of its 308,000-square-foot office at 3 World Trade Center. Uber has been letting go of employees as well. In May, the company laid off 6,700 people, or a quarter of its workforce. The company reported around $1.1 billion loss in the third quarter.

The industrial market is one of the few sectors to see activity jump in recent months. In the third quarter, industrial tenants signed on for 1.6 million square feet of space across New York City, a 71% year-over-year jump.

Developer Gotham Organization is facing a lawsuit over nearly $187,000 in outstanding rent at its 432 Park Avenue South office.

One real estate sector that has fared better than most during the pandemic has been industrial. Warehousing and storage grew by 28,000 jobs.

A Soho office landlord is suing Knotel over nearly $900,000 in unpaid rent, including six months of free rent that was part of its initial lease agreement. Northwind Group filed a lawsuit that the flex-office company Knotel stopped paying rent on its office space at 40 Wooster Street in March.

Extell Development’s efforts to build a hotel at 27 West 47th Street have been hampered by an uncooperative neighbor who has denied access to his property. The petition seeks a court order giving Extell access to Elo’s office building at 29 West 47th Street, in order to install and maintain code-compliant protections.

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