New York City office
and retail Market Research

June 2014

June 2014 » Market Analysis » NY New Developments

June 2014 New York New Developments

Major Developments

The South Bronx has had very few lodging destinations since the luxury Concourse Plaza Hotel at 161st Street and Grand Concourse closed in 1974. But now, with the opening of the luxury boutique Opera House Hotel at 436 East 149th Street last summer and the Umbrella Hotel looking to open 681 Elton Avenue this fall, the area’s hotel industry seems to be on the rebound.

The Mayor’s administration has suggested rezoning a five-block stretch around Grand Central Terminal to allow for the construction of SL Green’s planned 65-story tower project at 1 Vanderbilt. De Blasio’s plan looks to partly bring back the failed push by the previous mayor, Michael Bloomberg, to rezone 73 blocks of Midtown East to make way for larger office buildings. SL Green has been working with TD Bank about becoming the flagship tenant at the proposed 1,200-foot tower.

The International Property Measurement Standards Coalition, a global alliance of real estate groups, is in the process of unveiling a new system soon for measuring square footage at office buildings worldwide. The system would not be mandatory, and could reduce the size of buildings and therefore lessen their value. Many New York City real estate professionals believe that it is unlikely to happen since building owners will not voluntarily follow new standards if it could result in losing them money.

In the year since Waterman Interests acquired a new 75-year master lease for 400 Park Avenue, the landlord launched a $16 million renovation project and added several office tenants at the 21-story property near 54th Street. W Capital Partners, which provides liquidity for private equity investments, was the latest firm to sign a lease there, taking 11,000 square feet. More than 140,000 square feet has been leased in the past year and eight months. The new tenants are a mix of hedge funds, private equity firms and banks.

The Durst Organization and the Port Authority of New York & New Jersey have decided to lower asking rents for office space at One World Trade Center by almost 10 percent. Large tenants seeking space on the middle floors in the building would pay an average of $69 per square foot, a drop from the $75 per square foot. The 1,776-foot property is to open hopefully by the end of this year, however it is only 55 percent leased as of date. Media firm Condé Nast signed a lease for 1 million square feet in 2011, and is the sole major private tenant.

Penn Station is losing many of its fast-food establishments. Tenants like KFC and Pizza Hut, as well as eight other food stores, will leave the station in a matter of months. All of the fast food businesses are operated by the Riese Organization on the lower Long Island Rail Road level of the commuter hub. Riese held the leases for 42 years.

Private school Ecole Internationale de New York has just signed a 30-year lease for 15,000 square feet at a five-story Flatiron District building operated by the Gural family. The asking rent for the space was $60 per square foot. The head of the watch brand Tourneau owns the building at 206 Fifth Avenue, which is located between 25th and 26th streets. The Gural family leases the entire site, and most recently extended for 75 years at the time of the lease when talks with the school occurred.

The cosmetics company MAC recently signed a new 15-year lease for a portion of the ground floor in the Feil Organization’s 853 Broadway, fronting on Union Square South. One person familiar with the deal said would it be a record rent for the park area.

Demand for gym and workout studio space in Manhattan grew last year as the number of related leases more than doubled 22 to nine the previous year. Planet Fitness, Equinox Holdings and SoulCycle were among the companies to take space last year throughout the borough. The city’s Board of Standards and Appeals has also been granting more permits to fitness businesses. Last year, a total of 37 were approved, including 21 in Manhattan. The year before that, the city approved 24 permits for the above listed companies.

Bucking the Brooklyn bent, two Williamsburg-based restaurateurs are bringing a new upscale restaurant to the Upper West Side. Daddo Bogich and Merle Chornuk opened The Bedford in Williamsburg in 2010, but now they are ditching trendy North Brooklyn for Broadway and West 106th Street where they will open a high-end pizzeria.

General Growth Properties is now offering up the top floor of 200 Lafayette Street, where JC Penney snapped up a lease for the entire seven-story building in a 15-year deal with three five-year options back in May 2012. No rent has been determined yet. But insiders believe that the 16,780-square-foot space could get as much as $89 per square foot, lightening the load for the struggling department store chain.

Developer Atlas Capital Group, co-owner of the St. John’s Terminal Building, is negotiating with the state and Hudson River Park officials over a deal that would provide $100 million for the redevelopment of the decaying two-story Pier 40 near West Houston Street. The proposed deal calls for the transfer of unused air rights from the pier to the four-story terminal building at 550 Washington Street in exchange for the funds. Atlas would then tear down the building over the next decade in an effort to construct retail outlets and residential properties.

Seattle-based commercial real estate and investment firm Sabey Data Center Properties plans to renovate the top 15 stories of the 35-story former Verizon building in Lower Manhattan. Those floors will hold a total of 500,000 in office space, with the data center occupying the lower levels. Each of the office floors will get 35,000 square feet and floor-to-ceiling glass windows. Asking rents for that space will be in the low $50s per square foot. The upgrade of the 1 million-square-foot building at 375 Pearl Street is expected to begin this summer.

A proposed East Village development site plans to bring a 12-story, mixed-use building to a site on the west side of Avenue D between East 6th and 7th streets.

Plans have been filed to convert the four-story East Village hostel, the Whitehouse Hotel, into a nine-story hotel. At around the same time, the building, which is minority owned by hotel developer Sam Chang, and is in contract to be sold to an undisclosed buyer. Harry Shah, a majority owner associated with Manhasset-based Metro Sixteen Hotel LLC, and Chang are close to selling the property at 338 Bowery for $12 million. However, a proposed $5 million conversion would involve creating 68 rooms.

After months of negotiations, media firm Time Inc. has made it official with a lease at Brookfield Office Properties’ 225 Liberty Street. They plan on taking 700,000 square feet. The company initially was in talks for between 575,000 square feet and 650,000 square feet. The move would take Time Inc. Downtown from the current Time & Life Building at 1271 Sixth Avenue in Midtown. Time Inc. will pay lower rents.

H&M’s sister label & Other Stories has picked 575 Broadway in Soho’s Cast Iron District for the location of its flagship store. The planned opening will mark the brand’s first entry into the U.S. market.

Before Hudson Group Retail can renew its $21.3 million, 11.5-year leases for its 17 spaces inside the Port Authority Bus Terminal, it must come to terms with a newly-introduced living wage provision.

The developer of the Roseland Ballroom site just paid a pair of Broadway theaters $17.5 million for around 60,000 square feet of air-rights. That works out to $300 per square foot, half the price one expert reportedly thinks the market should fetch. Algin Management, which already has plans to build a 59-story apartment tower on the site of the defunct 52nd Street music venue, purchased a total of 58,392 square feet of excess development rights from two theaters owned by the Shubert Organization.
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