New York New Developments
Real estate leaders in New York have admitted that there’s a long road ahead before things return to normal or a new normal.WeWork recently exited four locations in Midtown, Soho and the Meatpacking District.
Knotel declared bankruptcy.
Gov. Andrew Cuomo is pushing a plan to get employees back in office buildings and office landlords are on board. Cuomo announced that rapid testing would be used in state-designated orange zones to open office buildings, along with restaurants and theaters. He said that major commercial operators with space totaling more than 100 million square feet have already agreed to offer regularly scheduled Covid tests to all tenants in their buildings.
Some companies have instead embraced the transition to working from home. Zillow has said its workers may continue to do so indefinitely, while Google pushed back its target date for employees going back to offices to September 2021.
Boston Properties just took a big write-off in recognition that flex tenants will struggle to pay rents. The company posted net income for the fourth quarter of $24.9 million, down 86% from $176 million during the same period last year.
Hotel operators are considering using their spaces: for housing the homeless, creating temporary offices and deals with operators for ghost kitchens.
WeWork claims the Chetrit Group is threatening to illegally draw down on a multimillion-dollar letter of credit at 404 Fifth Avenue.
Freshly has signed a 92,306-square-foot lease at 28 East 28th Street.
It is unlikely that chain stores will take over vacant spaces. More than 1,000 chains across New York City, nearly one out of every seven, that were open the same time last year have closed their doors over the past 12 months.
As rents fall and chain stores’ growth flatlined, the complaints diminished a bit, and long-running efforts to impose commercial rent control did not come to fruition.
Indoor dining will be back in New York City mid February with 25% capacity.
Urbanspace signed a 14,722-square-foot, ground-floor lease at 100 Pearl Street and will have 12,702 square feet dedicated to its food hall operations, along with an additional 2,020 square feet of back of house space. The food hall will take over the privately owned public space that connects Water and Pearl streets, and bring 16 “chef-driven food concepts” to the neighborhood.
Target has rented five Kmart stores. Target has been in expansion mode. The chain store is planning to open up to 40 stores a year.
Carmine’s landlord filed a notice of default for unpaid rent and was the country’s second-highest-grossing independently owned restaurant in 2017, bringing in $33 million from 1.4 million guests. Carmine asserts that it cannot be in default to the landlord because the pandemic has made it impossible to do business.
Trader Joe’s is coming to 125th Street in Harlem. The grocery store will open its 13th New York City location at 121 West 125th Street. The 28,000-square-foot location will be one of the anchors for the 17-story building.
The NBA Store at 545 Fifth Avenue, which has remained closed throughout the pandemic, now owes $7 million to its landlord, the Moinian Group against NBA Media Ventures. The Fifth Avenue retail corridor between 42nd and 49th streets has been suffering due to the pandemic. The average asking rent fell 16% year-over-year, and in the period since the NBA signed its lease, rents have fallen 40%.
Ralph Lauren shut its 28,300-square-foot store at 711 Fifth Avenue, and continues to pay around $27 million annually. Ralph Lauren then tried to sublease its space with Mango for around $5 million annually but that agreement was rejected as Mango is not of the caliber of luxury tenant they envision for the property.
The struggling AMC Entertainment Holdings secured $917 million in financing. The company hopes this will give it a cushion to weather through, as Covid vaccine distributions ramp up. AMC has executed a commitment letter for $411 million in debt financing, and has raised $506 million in equity since mid-December.
Shake Shack plans to open 60 restaurants across the country this year, more than twice as many as it opened last year.
One in seven chain stores, more than 1,000 across the city, shut in 2020. Some of the hardest-hit businesses were fast-casual chains, such as Subway, Hale & Hearty and Pret a Manger.
Commercial evictions could be on hold until at least May, if Gov. Andrew Cuomo’s 2022 state budget proposal is enacted as-is. The governor first proposed the ban, which would go into effect through new legislation, as part of his State of the State addresses. The current eviction ban, which has been repeatedly extended since enacted last March, is set to expire at the end of January.
New York is in need of money, and is considering casinos as an option. Vornado Realty Trust has proposed a gambling venue at its property near Herald Square. The latest push could have a better chance, with the pandemic leaving the state with a $15 billion shortfall.
Quarters’ U.S. expansion appears to have ended in bankruptcy. Eight properties and two additional limited liability companies tied to the German co-living firm filed for Chapter 7 bankruptcy. In New York, Quarters was actively leasing: 324 Grand Street in the Lower East Side; 629 East 5th Street in the East Village; 911 Jefferson Avenue in Bedford-Stuyvesant; and 186 North 6th Street in Williamsburg.
A judge ruled that 16 pool halls in New York state that shut because of pandemic protocols can now reopen until the larger lawsuit is litigated. They can operate under the state’s Phase 4 guidelines for indoor arts and entertainment venues, meaning they have to limit capacity to 25%.
A state Supreme Court judge has temporarily halted the Gowanus rezoning proposal. The City Planning Commission can’t certify the rezoning application until after a hearing is held on Jan. 27. The order was in response to a lawsuit filed by a coalition of neighborhood groups seeking to block City Planning from certifying the application. The city is seeking to rezone 80 blocks in the Brooklyn neighborhood, which would pave the way for the construction of an estimated 8,200 residential units, of which 3,000 would be affordable.
Union Square Partnership has unveiled unfunded plans to make over Union Square Park, including adding two acres to its footprint. Although the plan to grow the park to a total of 8.85 acres has been in the works for more than two years, it has become more relevant since the pandemic began pushing activities outside.
The blocks around Trump tower, on East 56th and 57th streets, have been heavily guarded since the president took office. The NYPD plans to reopen nearby streets that have been closed, and patrols of the area will be adjusted. Construction activity in New York City declined for the fourth straight year in 2020.
The Spiral, Tishman Speyer’s 1,041-foot-tall 2.85-million-square-foot office building at 66 Hudson Boulevard, had its topping out and will be completed in the third quarter of 2022. Leasing for the building is slow with 50% of the space has yet to be leased.
Javits is one of the vaccination sites the real estate industry is counting on to bring New York back to pre-Covid life. Recovery of offices may have more to do with how work patterns change than with vaccinations. Property tax revenue did not plunge with the city’s economy last year because assessments preceded the pandemic. This year, New York won’t be so lucky. The travails of hotels, office buildings and other real estate will cause property tax revenue to fall by $2.5 billion next year, the largest drop in at least three decades.
Real Estate Equities Corporation filed an application to build a 10-story mixed-use building on a lot in East Harlem. The developer signed a 99-year ground lease agreement with the property owner Khedouri Associates. The proposed building features a total 98,000 square feet of community facility and 36,500 square feet of commercial area.
MADDD Equities filed an application to construct an eight-story building on a quarter-acre site in Inwood. Most of the 75,000-square-foot building would be dedicated to a community facility with around 19,000 square feet of commercial space. The developers, a collaboration between SK Development, Ironstate and CB Development, filed plans for a 21-story office building at 358 Bowery, spanning about 112,600 square feet. The plan is for 16 floors of offices, above ground-floor retail and a community center.
The Farley Post Office building on Eighth Avenue has a newly opened 255,000-square-foot hall just west of Penn Station. It has a skylit space and art-filled interior.
Cindy Zhang, a lender, alleged in a complaint filed that Abraham Noy, owner of the 297-key Aliz Hotel at 310 West 40th Street in Midtown, defaulted on a loan that came due in November. Lenders allege that in addition to defaulting on the mortgage, Noy failed to bond numerous liens, preventing the sale of the property. The liens, from 2015 to 2019, total more than $2 million.
Gov. Andrew Cuomo called for the conversion of vacant commercial space into affordable and supportive housing. Cuomo cited the spike in empty commercial space as an opportunity to add dwellings. Such a proposal has already been promoted by the real estate industry. Last month, the Real Estate Board of New York identified 210 million square feet of class B and C office space citywide that could be converted.
70 bars and restaurants named as plaintiffs in the complaint filed in federal court against Gov. Andrew Cuomo. The venues, many of which are located in north Brooklyn, allege that the state’s ever-changing restrictions for indoor and outdoor dining violate their civil rights.
The city’s Department of Housing Preservation and Development has dropped its fight against the owner of Chelsea Hotel, allowing a long-planned renovation of the legendary hotel to move forward.
Another phase of the High Line is coming. The elevated park, which runs along Manhattan’s Far West Side and through the Hudson Yards, will be expanded to connect the newly opened Moynihan Train Hall. The new 1,200-foot pathway will link the final section of the High Line at West 30th Street and 10th Avenue to a pedestrian walkway at the Manhattan West megaproject.
JPMorgan Chase continues to knock down its Midtown East headquarters to make way for a new, 70-story office tower that will span 2.5 million square feet. The new building will be the first to take advantage of the district’s rezoning and will allow for roughly 1 million more square feet than the current structure.
A rise in Covid cases and government closures of indoor dining contributed to a loss of nearly 500,000 leisure and hospitality jobs. Restaurants and bars accounted for 372,000 layoffs. Nearly half of all restaurants expect further layoffs in the next three months. In New York, 78% of restaurants anticipated layoffs.
Overall, the economy lost 140,000 jobs last month, ending seven months of economic growth. The unemployment rate remained at 6.7%. Holiday shopping provided a reprieve to retailers in December. Consumers supported the return of 120,000 retail jobs, although the industry currently employs 411,000 fewer people than it did last year.
The rise of e-commerce has resulted in an industrial real estate boom while the pandemic remains a drag on brick-and-mortar outlets. Macy’s recently announced it will close 125 stores over the next three years. Bed Bath & Beyond said it will close 200 in the next two years.
Banks want to lend money to hotels, not own them. Wells Fargo sold a $51 million senior leasehold mortgage secured by a Marriott in Manhattan’s Pennsylvania Plaza, and lent $30 million to help the buyer take it off the bank’s hands. It’s been rough going for almost all restaurants, but especially those in Times Square. With tourism all but dead and offices nearly empty, the pandemic has ravaged their customer base.
A new law that targets wealthy buyers who scoop up commercial properties through anonymous shell companies could help stop the flow of illicit cash into real estate. The Corporate Transparency Act requires true owners of shell companies to identify themselves to the U.S. Treasury Department’s Financial Crimes Enforcement Network. Those who do not comply face criminal penalties.
The Independent Budget Office predicted that the city’s economic recovery will be a drawn-out affair, affecting employment and real estate sales through mid-2023. The watchdog expects an $11.3 billion drop in tax revenue over that period. A troubled Midtown development project is finally gaining some momentum. Rabina Properties plans to build a 452,134-square-foot, mixed-use building at 520 Fifth Avenue in Midtown. Plans for the 70-story building at the corner of East 43rd Street include 98 residential units across 16 floors, along with 15 stories dedicated to office space and several floors of amenities, including a solarium and private dining.
