New York Market Overview

Office:

Companies that listed their offices for sublease are now pulling them off the market. At least 589,000 square feet of space that was offered for sublease has been delisted. Subleases now account for 30% of total vacant office space. 3.5 million square feet of office space was offered for sublease in the first quarter of the year, compared to 4 million square feet in the fourth quarter of 2020, and 4.6 million square feet in the third quarter of that year.

Average asking rent was $72.97 a foot, down 0.4% from March and 8.3% from a year ago.

Net sublease availability across the borough decreased slightly to 30,000 square feet for the first time since May 2020. Manhattan sublease inventory in April was 21 million square feet, about a quarter of the total office availability in the borough.

There was some good news for office landlords: The pace of workers returning to their offices grew in April, with 18.3% of workers remaining remote due to the pandemic. That’s down from 21% in March and 22.7% in February.

Blackstone Group firm wants a full return to the office, and is asking vaccinated U.S. employees in its investment divisions to head back on June 7.

JPMorgan Chase, Goldman Sachs and Morgan Stanley, is planning to bring back all its employees starting in early July. Other firms are allowing a hybrid option. Deutsche Bank has said employees can work from home about three days a week. HSBC said it expects to cut its office footprint 20%.

Google said about 20% of staff will work from home permanently, 20% will work out of offices at a new location and 60% will work from their current location. Employees can apply for both location change options and will need approval from their managers.

Other tech companies have adopted flexible work policies for life after the pandemic, such as Salesforce and Microsoft. It’s a contrast from major banks like Goldman Sachs and JPMorgan, which expect most employees to return to the office.

RFR Holding is in contract to buy the retail portion of 522 Fifth Avenue and has already started marketing the building as a 612,000-square-foot corporate headquarters, with plans that include a new lobby along 44th Street and outdoor spaces on three of the building’s L-shaped setbacks. The 38,000-square-foot retail space could be turned into the office tenant’s amenities or as a way for a tenant to display its own wares.

Macy’s is pushing ahead with its plan to build an office tower above its Herald Square store, and is now offering to put $235 million into improving the surrounding area as it seeks approval. Macy’s said the planned overhaul of its flagship store will generate $269 million in tax revenue for the city annually, and contribute $4.3 billion in economic activity each year.

Office developments on the West Side like Hudson Yards and Manhattan West have been able to successfully draw office tenants. The state is proposing a plan that would pave the way for 10 new buildings around Penn Station, just a block from the Macy’s store.

Retail:

Nearly half of the 3,597 stores expected to open nationwide this year will be no-frills discount shops. Dollar General will open 1,035 locations, Dollar Tree will open 393 stores and Family Dollar will open up 200 shops. Five Below will add 200 stores and grocery chain Aldi is opening 100 locations.

These new stores are a small drop compared to the 3,395 retailers expected to close this year.

Many chains have already declared bankruptcy, while others teeter on the brink of collapse. Stores have skipped rent payments over the last year, and many companies have been closing locations.

Francesca’s closed 342 shops, 7-Eleven closed 300 locations and Bed Bath & Beyond closed 246 stores.

CVS Pharmacy leased 12,500 square feet of retail space at 512 7th Avenue, including 8,500 square feet on the ground level and 4,000 for storage in the basement.

Family Video closed all 250 locations, Pet Valu closed 119 stores, Godiva closed 116 locations and Heritage Brands closed 81 stores.

Ann Taylor, Bob’s Discount Furniture, Men’s Wearhouse and Tilly’s did not pay any of their rent. One year and the lifting of many restrictions later, those retailers have all returned to paying 90% or more.

Rent collections for national chains hit 93% in April, the highest they’ve been since the pandemic began, That’s just the 96% of rent that national tenants paid during the same month in 2019.

Last April, collections for national tenants were at 63%, with 21% of 135 major chains paying no rent or a small fraction of what was owed.

RXR Realty filed suit against American Girl for missing rent after the dollmaker claimed it should get an $8 million-plus pandemic discount. RXR alleges that American Girl owes about $500,000 in May rent at its flagship store at 75 Rockefeller Plaza

Hotels:

Tourists have yet to come back to New York City, but new hotels are projected to open en masse this year. Close to 80 hotels with more than 13,000 rooms, the most in many years and plan to welcome their first guests in New York City in 2021.

Arlo Hotels is set to open a high-end 489-room property close to Hudson Yards in the spring. Brooklyn Vybe Hotel 74-rooms, the Baltic Hotel in Brooklyn 33-rooms and the ModernHaus SoHo with 114-rooms has already opened.

In New York, despite many hotels taking rooms off the market by closing temporarily or permanently, occupancy was just 53.8% for the week of May 1, below the national average of 57.1%. The city’s hotel occupancy was 89.8% for the same week in 2019.

Less than 37 million people are expected to visit the city this year, down from 66.6 million in 2019 plus business travel is expected to be less than before Covid.

JPMorgan agreed to contribute more than $40 million for upgrades to public spaces as part of the redevelopment of its headquarters at 270 Park Avenue.

Howard Hughes Corp. has offered to invest in the South Street Seaport Museum and make improvements to public spaces as part of its proposal to build a residential building at 250 Water Street.