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September 2017

September 2017 » Market Analysis » NY New Developments

September 2017 New York New Developments

New York Major Developments:

Brookfield Property Partners are in talks to become a partner in one of the largest redevelopment projects underway in New York City. Brookfield is negotiating to acquire a stake in the St. John’s Terminal site, which Westbrook Partners and Atlas Capital Partners are planning to transform into a five-tower, 1.7 million-square-foot mixed-use complex. The three-block-long site which consists of north, south and center sections would hold 1,586 rental apartments, offices, a hotel and around 400,000 square feet of retail space next to Hudson River Park’s Pier 40.

Manhattan’s hotel market may be nearing the end of its more than six-year struggle to absorb new supply, as the slide in room revenues slows and growth is forecasted. Through the first six months of this year, the average revenue per available room fell 1.3% from the same period a year earlier to just under $210. That’s an improvement over the past two years, when Manhattan’s RevPAR dropped 3.8% in 2016 and 3.9% in 2015 during the same period, as thousands of new hotel rooms were added to the market. But the pipeline of new supply is dwindling and room revenues will level out soon.

Some investors are relying on a slowdown in commercial real estate that could provide a prime opportunity to acquire distressed properties.

The average space per worker, including work stations and communal spaces has increased from 142 square feet in 2016 to 165 square feet. The majority of office space is dedicated to these shared spaces: 52% of seats were dedicated to communal spaces while 48% were set aside for assigned workstations.

Chelsea lost Barnes & Noble which closed after 14 years. Soaring rents and competition from online retailers are pressuring Barnes & Noble (with nine Manhattan stores) and Borders (with five Manhattan stores) to seek out a more affordable real estate model that includes multi-level stores and basement locations.

Japanese conglomerate SoftBank’s investment in WeWork is larger than previously thought. While SoftBank’s investment was believed to be at $300 million and at $3 billion, now the co-working startup will be the beneficiary of $4.4 billion in capital, with $3 billion going to WeWork and another $1.4 billion put toward WeWork China, WeWork Japan and WeWork Pacific.

Canadian investors have shifted their interest from commercial office spaces to industrial and multifamily buildings. Only 39% of Canadian investment in U.S. real estate has gone to commercial properties this year so far, while industrial properties made up 29% and multifamily buildings took another 27%.

The shifting of consumer habits has put hundreds of retail stores out of business but flagships may benefit. As retailers contract, the last stores they pull out of are their brand-builders in marquee locations like Soho, Times Square and Fifth Avenue. The general feeling, for now at least, seems to be that flagship stores will continue to be valuable for those who can afford the huge rents.

Over 90% of retail sales occur in brick-and-mortar stores, and more than 50% of online sales are made by brick-and-mortar brands, indicating that traditional retailers may be in a less dire position than previously thought.

Sam Chang just landed $83 million to refinance a Holiday Inn in Times Square. Deutsche Bank provided the loan, which replaces an earlier one that the bank provided in 2015 totaling $80 million. Chang opened the 35-story hotel at 585 Eighth Avenue in 2015.

Knotel has been expanding and has around 400,000 square feet of space in New York, where it’s tripled its size this year after raising a $25 million Series A funding round. They will probably double their square footage again this year.

A panel of appellate court judges halted Aurora Capital Associates and William Gottlieb Real Estate from moving forward with their large commercial development on Gansevoort Street in the Meatpacking District. The decision prevents the developers from doing any exterior work on the buildings at 60-68 and 70-74 Gansevoort Street until an advocacy group’s appeal makes its way through the court.

Taconic Investment Partners and Silverstein Properties are spending $20 million to turn the former industrial building 619 West 54th Street into a life sciences center. The landlords hope the revamp will attract research and pharmaceutical firms. Taconic bought the 325,000-square-foot building for $112 million in 2012. In February, Silverstein Properties bought a majority stake, valuing the building at more than $180 million. Taconic kept a 10% interest.

Extell Development plans to build a 437-key Hard Rock Hotel at 159 West 48th Street. between Sixth and Seventh Avenues. The project is expected to span 207,121 square feet and rise 35 stories. Extell acquired the ground lease for the property in 2011 for $26 million. The developer also bought 45,000 square feet of air rights.

Frank Ng plans to build a 32-story hotel at 132 West 28th in the Garment District. The 203-key hotel would span 232,198 square feet. In March, Isaac Chetrit’s AB & Sons filed a lawsuit against Ng, alleging that he backed out of an agreement to buy another Garment District building at 315 West 35th Street. Activists who tried to save an Upper West Side synagogue from demolition are giving up. The Congregation Shaare Zedek will stop holding services in the building after the High Holy Days in September. Last month a judge signed off on the sale of the property’s leasehold to Ornstein Leyton for $24.3 million. The firm plans to demolish the Synagogue at 212 West 93rd Street and build a 14-story, 20-unit condo building.

Toys “R” Us is coming back to Times Square for the holiday season. The toy store plans to open a temporary, 35,000-square-foot store in August at 1466 Broadway.

The owner and would-be buyer of the James Hotel have come to a settlement agreement after a long legal battle, making way for the sale of a Soho property. A year after PGIM Real Estate signed a contract to sell the 114-key hotel at 27 Grand Street to Thor Equities for 70 million, the property remains in limbo, mired in litigation.

A prime stretch of retail at the $1.5 billion mall at the World Trade Center is not expected to be handed over to Westfield Corp. for another year. This is one of several challenges facing the shopping complex as it approaches its one-year anniversary.

Normandy Real Estate paid $54 million to up its stake in two Financial District office towers. The buildings are located at 80 and 90 Maiden Lane and span 583,000 square feet
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