New York City office
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November 2009

November 2009 » Market Analysis » NY New Developments

November 2009 New York New Developments

Major NYC Developments

11 Times Square, the city's largest office tower, remains entirely unleased more than two years after breaking ground in 2007. Some give the owner little chance of holding on to the 1 million-square-foot building without a significant debt restructuring. They cite the current weak economy, the 25 percent decline in rents, and the cost of the building, a pricey $1,100 per square foot as the reason. There are currently no signed leases for the 40-story glass commercial tower stationed across from the Port Authority terminal, which is three-quarters completed.

JPMorgan Chase may hold onto its 60-story office property at One Chase Manhattan Plaza in the Financial District, after receiving insufficient bids. The building is among 23 office properties that JPMorgan has on the market.

Regarding distressed properties and the real estate market recovery in the New York’s hospitality industry will largely rely on the financial sector and whether lenders will begin loosening their grip on credit. Any hotel owner that has a loan coming due has the almost impossible mission or task to refinance the property which is the biggest problem.

The site of a former Chelsea nightclub, Limelight, which had once been a 19th-century Episcopal church may become a retail mall. The Preservation Commission will look at a proposal to bring dozens of boutiques and restaurants to the site. More than 40 leasing deals are in negotiation, and signed tenants include a candy shop, a rain boot store, and a soap store. Community board approval is not necessary; a Landmarks Commission vote will decide, yet the board expressed skepticism about the project.

After its bankruptcy broke, Café des Artistes may rise again. The 92-year-old establishment has attracted numerous investors. If the spot at One 67th Street near Central Park West does reopen as the café, the union representing the former workers may demand that all the old contracts are honored. But while this could be a deterrent to potential investors and restaurateurs, the workers are integral to Café des Artistes.

The Tenement Museum on the Lower East Side has begun demolition work at 103 Orchard Street on the corner of Delancey Street. The space that will become the museum's visitors center. The space, formerly a clothing retail store, has gotten a mid-renovation treatment, with the images serving as a visual record of what's underneath the dry wall. The museum currently houses its visitors center at 108 Orchard Street, purchased in 2007.

The state is supporting an initiative to build more docks along the Hudson River between New York City and Lake Champlain. The project, for which the state has granted $750,000, is to address the issue of poor water access, a problem that has plagued the waterfront. The development is a part of the year-long quadricentennial celebration of Henry Hudson's discovery of the waterway. 40 different locations have been identified as possible dock sites, as different towns along the river are vying for a portion of the funds.

The New York City Landmarks Preservation Commission approved an expansion of a six-story building at 980 Madison Avenue between 76th and 77th streets, two years after rejecting a proposed 30-story glass addition to the building. The most recent plan was approved and includes an addition limited to 108 feet.

New York City Schools chancellor Joel Klein supports opening a public high school on the Upper West Side that specializes in writing. The school would be named after Pulitzer Prize-winning author and teacher Frank McCourt and open in fall 2010 at the Louis D. Brandeis High School campus on 84th Street between Amsterdam and Columbus avenues. The Frank McCourt School would join three other specialized high schools on the campus. The city is planning to hold a public forum for votes on the school.

Plans for an alternative-energy theme park are in motion, due to a $900,000 grant from the U.S. Department of Energy and $1.4 million in city funds. The space is to be located on Ward's Island in the East River, and will create energy to power 100 city homes. The park will utilize four 100-kilowatt tidal turbines, a 140-foot tall wind turbine, and 800 square feet of solar panels, with the resulting energy to be sent into the Con Edison power grid. The site should be fully operational in two years.

Restaurant mogul Steve Hanson has opted to swap foie gras for burgers and fries. In January founder of the B.R. Guest restaurant empire, shut down his three-star Italian gem Fiamma, a Soho spot famous for its $92 prix fixe menu laden with indulgent foods like foie gras and quail eggs. Hanson blamed the recession's decimation of Wall Streeters' dining dollars. Now he's firing up the grill for a far more modest American culinary staple: burgers. Hanson has leased the former home of barbeque joint the Hog Pit at 22 Ninth Avenue at 13th Street in the Meatpacking District for Bill's Bar & Burger. It is to open later this month, serving up turkey burgers and milkshakes.

Real estate investors and New York's health care organizations are looking to acquire three hospital sites in New York City. Offers for sale or net lease on the complex are due on the hospital site, the Cabrini Medical Center. The property is located at the Gramercy Park section of Manhattan between Second and Third avenues with frontages on the north side of East 19th Street and the south side of East 20th Street. The U.S. Bankruptcy Court is offering the medical center for sale. The property consists of five buildings totaling 452,600 square feet of gross building area, with 367,700 square feet of total zoning floor area. The five buildings are built and operated as a single complex of buildings interconnected at various levels. With the exception of two of the buildings, the properties can be acquired individually.

As rating agencies slash the value of bonds tied to securitized commercial real estate loans nationwide, some loan servicers are taking a harder look at the value of their assets and finding they are worth a lot less. There were more appraisal reductions for New York City properties last month than in the preceding eight months combined. Troubled loans in commercial mortgage-backed securities, known as special servicers, reported in September appraisal reductions for 11 properties, reflecting a total reduction of $150 million that month. In the previous eight months, there were only three properties that showed a total reduction in value of $15 million; and there were no appraisal reductions published in the first eight months of 2008.

After agreeing to hand off the site of its nursing home on 106th Street between Columbus and Amsterdam avenues to developers, the Jewish Home and Hospital is seeing local politicians fighting to rezone the spot and keep future construction under 15 stories tall. A City Council member is filing to rezone and stop the Jewish Home and Hospital site from being turned into a residential tower. The move has caught the attention and support of Manhattan Borough President, State Senator and Assembly member. Over the past several weeks, many residents have been vocal in their opposition to the proposed construction over the land swap between the hospital and the developers.

Duane Reade has been updating its image over the past year, and has announced that a new 8,500-square-foot location at 200 Water Street will be the first store to feature its new, remodeled interior. The drug store chose this location due to the influx of renters in this area, as 15 new residential buildings have been built in the Financial District in the last four years. Duane Reade plans to re-brand 100 of its 253 locations in the city this year, adding better-lit, wider aisles and new interiors.

The city may take legal action to claim their right to the landmark restaurant in Central Park, which has been recently appraised at $19 million. The restaurant, which filed for bankruptcy, was trademarked in 1973. But when the restaurant filed for bankruptcy last month, Dean Poll was awarded the license and said he supports the city's effort to claim the trademarked name.

The Whitney Museum's proposed satellite location at the entrance to the High Line is gaining momentum after three years after a tentative agreement was reached with the city. Last month, the museum signed a contract with the New York City Economic Development Corporation to buy the site at Washington and Gansevoort streets for $18 million.

Landlords are looking to artists to fill vacant commercial space with artwork, something rarely seen before the economic downturn. Like those landlords who have donated space to artists, commercial property managers are renting out space at a discounted rate, typically for a few weeks. Right now, nearly 50 works of art occupy the Port Authority Bus Terminal.

Installation is under way in the last major section of the September 11 Memorial & Museum at the World Trade Center. Six-hundred ninety-four pieces of steel, weighing 1,700 tons, will be installed over the PATH tracks in the memorial's southwest corner. The steel installation is to be completed by the end of this year.

Broadpoint Gleacher Securities Group signed a 15-year lease for 75,000 square feet at 1290 Avenue of the Americas at 51st Street and is looking to expand in the future. The asking rent was between $50 and $60 per square foot. The group will sublease its current office space at One Penn Plaza.

The Corn Exchange Bank Building, a 125-year-old Harlem landmark at 81 East 125th Street, will soon lose its top two floors after the city's Department of Buildings found that it was too dangerous to stand as is. The building was purchased from the city by Ethel Bates, a community activist who promised to renovate the building and open a non-profit culinary school at the site. When the developer backed out of the project, the owner found that she could not finance the repairs or follow through with the plans for the site. The city repossessed the property, but it was too late to salvage the top stories because the masonry is at risk of falling.

The Port Authority of New York and New Jersey decided against a proposal that would use Pier 42 as a staging area for World Trade Center construction. Under the plan, the Port Authority would have used the Lower East Side pier to store steel construction beams for the PATH transportation hub by the WTC site. The storage space would have blocked off waterfront space and required approximately 60 truck trips per day between the pier and the WTC construction area. Area residents balked at this prospect. It was more loss of access to the waterfront. It was more trucks going all the way through from one side of Manhattan to the other. As a result of community pressure, the Port Authority has decided to use a contractor which will deliver the beams on an as-needed basis.

The Downtown Alliance has completed a $400,000 study into possible renovations for the Greenwich Street South neighborhood in the Financial District. Development ideas include new parks and pedestrian space with hopes that the project will yield between 6.5 million and 8.3 million square feet of development.

Chabad of the Upper West Side won approval from the Landmarks Preservation Commission to build a day school, synagogue and community center inside two buildings at 43 and 45 West 86th Street between Columbus Avenue and Central Park West. The group will renovate the two landmarked rowhouses for its new facilities, forcing the renters who currently live in the buildings to move out. Community Board 7 had voted down Chabad's plan, but recently the commission unanimously approved the project. Early projections estimate that the renovated space will be ready by 2013.

Investors are likely to eye real estate for new acquisitions because the bargains resulting from the down market could make properties an attractive investment. More investors are ready to take advantage of unusually low property prices. A lot of the investors are now thinking of shifting their focus to real estate, because that's where they see the opportunities. Investors are unlikely to focus on any one particular sector of the industry, but rather the whole.

Beauty giant Avon is in the midst of negotiating a deal for 250,000 square feet of space at 777 Third Avenue for its new U.S. headquarters. The 15-year lease on the second through 10th floors would mean that Avon would vacate its current space at 1251 Avenue of the Americas. Publishing company Hachette Filapacchi has also been eyeing some of that same space.

After 25 years, the Municipal Art Society of New York is swapping its Villard Houses headquarters at the Palace Hotel for the Steinway Hall Building at 111 West 57th Street. The non-profit urban design organization inked a 10-year, 12,749-square-foot lease for the 16th floor, where it will replace architecture firm Kohn Pederson Fox, which is moving to 11 West 42nd Street. The entire Steinway Hall Building is in the midst of a rejuvenation. Non-profits and foundations like the Municipal Art Society are flocking there in the wake of the Economist's relocation to 730 Third Avenue. The asking rent on the new Municipal Art Society space was in the low $50s per foot.

In the midst of the recession, a streetscape with empty storefronts has become a common sight, but in New York, some retail landlords are filling their vacant storefronts with artists' galleries. Artists get a unique opportunity to showcase their work in high-traffic retail areas. At the same time, landlords might earn some income, and a storefront that would otherwise be an eyesore becomes a cool new spot.

Embattled developer Harry Jeremias is facing a new round of litigation for allegedly defaulting on $48 million in loans used to purchase and renovate a 13-story office tower at 216 West 18th Street. They allegedly defaulted on the loans after the project encountered months of construction delays, multiple stop-work orders and deteriorating safety conditions at the site.

New York City is beginning to see more office buildings that embrace creative interior layouts. More offices are following the trend in hopes that it will inspire hard work and creativity. People are so much more aware of their spaces, of the lighting and the materials and what being comfortable in your space can do for the work flow.

Commercial real estate lender Capmark Financial Group has filed for bankruptcy. The group's filing for Chapter 11 protection came on the heels of mounting speculation that Capmark, a former subsidiary of GMAC, was in severe financial distress. Capmark has $20.1 billion in assets and $21 billion in liabilities. Last month, the group reported a $1.62 billion quarterly loss, raising concerns among industry analysts that the troubled commercial real estate market may plunge further into distress.

An East Village church is rebuilding after being burned by both a fire and an unscrupulous development deal. After a fire rendered the Elim Pentecostal Church unusable, the structure is still planning to reopen at 602 East 12th Street on the corner of Avenue B. But the plans come after months of negotiations with a group posing as investors. The alleged investors were trying to steal the property from the church. The building once housed the 800-seat movie spot the Charles Theater, and the church had been honoring the building's history by showing films, up until the fire severely damaged its roof.

Although Community Board 2 has thrown its support behind the redesign of the St. Vincent's Triangle, the plans drawn have caused many residents to question whether the ambitious park design is sustainable. An advocacy group says it's concerned that St. Vincent's won't be able to maintain the new West Village park and that the 24-hour operational schedule could raise safety problems. But chair of Community Board 2, believes that the current triangle is a waste of space in desperate need of an overhaul. This plan reflects what we think is most important, that the park will be at grade.

The hotel development sector is feeling the impact of the ongoing credit crunch, with new project announcements nationally falling to their lowest level in nearly five years and cancellations or postponements continuing to rise in the third quarter. A lack of funding has contributed to fewer new hotels in the construction pipeline, which is down to 3,890 projects overall, a three-year low. After 1,032 new hotels opened in the first three quarters of 2009, 355 projects with 41,804 rooms are to open during the remainder of the year. 988 hotel projects, amounting to 112,684 new rooms, will open in 2010, a 10 percent decrease from previous forecast for next year. The fall can most likely be attributed to expected postponements and cancellations, and to difficulties in securing loans, especially for relatively small projects.

It seems like a while since a new building went up on West 57th Street, that is between Fifth and Eighth avenues. The Hilton chain is completing a new hotel at 102 West 57th Street. The new 28-story building will contain a Hilton Club, comprising of 161 timeshare studios, one-bedroom suites and a spa, similar to Hilton Clubs that in Las Vegas, Orlando, South Beach and elsewhere. As for the 57th Street project, it has been designed as an expansive curtain-wall rising in three tiers of set-backs. At street level, it occupies its site with a broad expanse of glass emphasized by a metal canopy stretching from one side to the other.

The Garment Center district has historically been heavily populated by garment factories, the industry had 10,000 New York factories at its peak, but in recent years, office tenants willing to pay high rents have forced them out. Only 3,300 fashion tenants remain. Many established designers have since moved their production processes to China or India, but that isn't an option for up-and-coming designers and students; fashion advocates say rezoning will stunt creativity and growth.

On East River Plaza, the new big-box shopping center on FDR Drive in East Harlem will have its first store opening. The 110,000-square-foot Costco wholesale warehouse club will be the first of several big name tenants, including Target, Best Buy and Marshall's, to welcome customers at the new shopping center. Only 30,000 square feet out of an available 485,000 square feet is left unclaimed. The six-acre shopping site stretches from 116th to 119th streets.
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