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July 2016

July 2016 » Market Analysis » NY New Developments

July 2016: New York New Developments

New Developments

U.S. commercial real estate values continue to experience a slowdown in growth in 2016. Despite the slight uptick, property value appreciation has slowed significantly, after near-double-digit gains in each of the past few years. Cap rates have stopped declining.

The City Council approved plans to rezone portions of the Financial District that will allow landlords to fill unused space with retail. 20 buildings along Water Street can fill in 110,000 square feet of pedestrian arcades. In exchange, the landlords are required to upgrade nearby plazas and any of the arcades larger than 7,500 square feet must go through the ULURP process in order to build retail shops. Chain drug stores and banks can also only respectively take 50 and 30 feet of frontage.

Co-working spaces now occupy more than 6 million square feet across Manhattan, Brooklyn and Queens. At least 53 shared-office providers now operate throughout the city at 180 locations.

Express is the latest fashion retailer looking to get out of its lease on Times Square's. Express is reportedly paying $20 million per year for the 30,000-square-foot space it leased at 1552 Broadway in 2013. Now, nearly three full years into the 15-year lease, the retailer has struck a deal with their landlords allowing them to market the lease. If they find a new tenant, they will terminate the Express lease and sign a new one.

Extell Development is suing the Port Authority of New York and New Jersey in order to get access to documents it requested last year through the board's Freedom of Information Policy in regards to Extell's bid to acquire and develop the site at 431 West 33rd Street. The Port authority initially brought Dermot Company to develop the site, but began seeking others after Dermot backed out. Extell believes that the bidding process was not conducted properly, and that the agency Extell's innovative scheme to develop the property to other third-party bidders. Extell added that despite making the "highest valued bid for the lease," the Port Authority chose to lease the site to another entity.

SL Green Realty">SL Green Realty One Vanderbilt office development in Midtown believes that the project's total cost will be $3.14 billion and hopes to close on a $1.5 billion construction loan by the end of the summer. SL Green will need around $1.64 billion in equity to complete the planned 65-story, 1.7 million-square-foot building. SL Green is currently in discussions with potential joint venture partners. The company detailed how selling a 50% stake in the project would cover roughly $820 million of the required equity, and SL Green was confident the REIT would be able to score a partner and fund a project that will cost it north of $1,800 per square foot.

Related Companies">The Related Companies has priced two penthouses at 70 Vestry Street in Tribeca at $65 million and $50 million. Related is aiming for a total sellout of $690 million, per the offering plan approved by the New York state Attorney General's. On a per-square-foot basis, the average asking price is $4,526, according to AG filings.

Manhattan's hotel sectors are approaching the softening after a strong run. At Manhattan's white-glove hotels there are plenty of rooms vacant but owners are keeping their rates high. The city's limited-service hotels are slashing their rates in a frenzy to compete.

Hell's Kitchen office market has asking rents that have increased 43% over the past three years. The average asking rent is now $55 per foot. Pershing Square paid $250 million for 787 11th Avenue with partner Georgetown Co and are spending $100 million of renovations on the former Ford showroom to convert it into high-end offices. Ackman's firm is taking 50,000 square feet. Pershing Square">Pershing Square now located in the Plaza District will pay about $88 per foot at the building. Overall, Hell's Kitchen has just 8.1 million square feet of office space, but its vacancy rate is around 2.5% compared to Manhattan's overall vacancy rate of 7.5%.

Sotheby's is seeking new headquarters and is talking with Related Companies' Time Warner Center and Hudson Yards, the Olayan Group's 550 Madison Avenue and the Trump Organization's 6 West 57th Street. Sotheby's is currently headquartered at 1334 York Avenue, where it has about 490,000 square feet. In 2013, it was looking to sell the building, but it's unclear if the property is on the market again.

Hidrock Properties is planning a new 161-room hotel on a Midtown assemblage it acquired for $47 million. Hidrock filed plans for a 116,000-square-foot, 31-story hotel at 12 East 48th Street.

Samson Klugman and Leo Tsimmer are planning a 14-story, 70,000-square-foot retail-and-office building at 827 Broadway. Retail will span the first three floors of the building, with the remaining 11 floors will be devoted to office space. The plans call for terraces on the fourth floor and roof, an amenity many landlords in the Midtown South market consider a necessity in order to attract tenants.

Isaac Chetrit">Isaac Chetrit and Charles Aini plan to build a 15 story 80 room hotel on a site that is currently a 3 -story retail building at 1420 Broadway. The 7,000-square-foot property, located between West 39th and 40th streets, offers more than 34,000 buildable square feet in total. Construction is not set to begin for another four years. The entire building is currently triple-net leased to cafe Olive Tree Deli. The hotel would connect to a ground-floor retail space at the 24-story, 415,000-square-foot office building at 1412 Broadway. The owners have begun marketing the 4,800-square-foot space, which Cafe Europa is set to vacate by the year's end, asking rents of $350 per square foot.

Olayan Group">Saudi conglomerate Olayan Group closed on its $1.4 billion acquisition of the Sony Building at 550 Madison Avenue, receiving a $570 million bridge loan ING Group. The building is 37-stories and contains, 853,000-square-foot.

D'Agostino is looking to sell 9 of its locations in Manhattan at 633 Columbus Avenue, 1233 Lexington Avenue, 578 Third Avenue and other locations.

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