New York New Developments
Tourism in NYC has fallen by 80% and nearly 9 in 10 office employees are still working remotely.The New York City Employees’ Retirement System ramped up its exposure only to see it underperform the stock market by $260 million and rack up at least $110 million in fees between 2016 and 2019.
The pandemic has shaved $16 billion off projected construction spending in 2020 and 2021. The New York Building Congress estimates spending will reach $55.5 billion this year, down from the $65.9 billion previously forecasted. Next year, spending will be just about flat at $56.9 billion, which is also a drop from the trade group’s earlier estimate of $62.1 billion. The group does not see 2022 as a comeback year, either: Spending will drop back down to $56.1 billion.
A federal judge blocked a religious group’s efforts to squash Gov. Andrew Cuomo’s latest restrictions on large gatherings in Covid-19 hot spots. The order limits the number of people who can congregate in houses of worship in areas where Covid-19 cases are on the rise, in addition to mandating that nonessential businesses and schools in those areas also close.
The overall rate of economic recovery from the pandemic is slowing. More than 700,000 fewer jobs were added in September than in August, due to the loss of government positions as schools delayed bringing back their workforce and temporary census hiring reversed course.
Soon, all buildings larger than 25,000 square feet must post a letter grade based on a federal rating system by Oct. 31. The grades are similar to those posted on restaurant windows based on an Environmental Protection Agency’s Energy Star tool, which provides buildings with a score of one to 100 based on energy consumption.
Things were going great for the Port Authority until Covid-19. Now it’s asking Washington for billions of dollars. Vehicular traffic is back within 10% of normal and shipping at the agency’s ports.
New York’s moratorium on commercial evictions and foreclosures due to non-payment of rent will be in place through Jan. 1, 2021.
Governors Island is closer to becoming a year-round attraction. The City Planning Commission certified an application to rezone the island. The rezoning would pave the way for up to 4.5 million square feet of development on the south side of the island, including university space, hotels, offices, biotech/research and retail.
Industrial:
The New York industrial real estate market is on fire. Industrial tenants inked deals for 1.6 million square feet of space in the five boroughs during the third quarter of the year, a nearly 71% increase over the same time last year.
The availability rate for industrial and warehouse space held steady at 8% from the second quarter of the year. Average asking rent remained the same at $23 per square foot.
Amazon secured a 975,000-square-foot warehouse at the Matrix Global Logistics Park in Staten Island. It was the largest industrial deal of the past quarter.
City Planning certified two special permit applications seeking to allow ground-floor retail and other uses at 61-63 Crosby Street and 5 Mercer Street. Much ground-floor and residential use is technically illegal in Soho, a long-standing issue that the broader neighborhood rezoning is expected to address.
Prices for debt backed by hotels, restaurants and retail in New York City are among the hardest-hit sectors, as the pandemic emptied out tourist destinations and new loans have slowed. Bankers and the real estate industry are bracing for further declines. In 2021, it will be all about commercial real estate and the securities linked to it.
Amazon inked deals for warehouses at 5 Warehouse Lane in Elmsford, 2300 Linden Boulevard in Brooklyn and 1502 Bassett Avenue in the Bronx. These sites are to open in the first half of 2021 as delivery stations.
Retail:
A third of restaurants and bars that were open before the pandemic are now closed. The same number could close in the next six months, threatening more than 100,000 jobs.
Even though there have been small signs of recovery in the retail sector, rent payments to landlords are still below pre-pandemic levels. To make up the difference, some landlords have been experimenting with solutions that will help them.
Demand for high-end retail has dropped since the onset of the pandemic. A number of luxury shoppers have pivoted to online, and, as a result, some retailers are closing.
106 Spring Street, a 6,000-square-foot retail space sat empty for years, is now heading to foreclosure.
On Fifth Avenue, luxury fashion company Valentino SpA is suing its landlord to get out of its lease.
Indoor dining has resumed in New York City, but may not be enough to save some of the city’s most famous restaurants.
Even though retailers have been doing better, rent collections will likely be dependent on another federal stimulus package, rent relief expiration, potential lockdowns throughout the country and the seasonal impact on outdoor activities.
Gap Inc. will close 350 of its stores, 220 Gap shops and 130 Banana Republic stores by 2024.
An appraisal of Kushner’s 248,457-square-foot retail condo at 229 West 43rd Street cut its value by 80%, to $92.5 million from $470 million in 2017.
Tribeca Health & Fitness, located at 107 Chambers Street, filed for Chapter 7 bankruptcy.
Bed Bath & Beyond will not be closing its Chelsea location. Instead, the store will close for renovations and become a flagship location for the retailer.
Joe Allen restaurant on 46th Street has reopened since closing in March. The eatery’s attempted revival will serve as a litmus test for restaurants that are trying to survive in an uncertain climate, particularly where foot traffic has plunged and quality-of-life complaints have arisen.
The Metropolitan Transportation Authority has proposed collecting a percentage of rent from businesses within the train station based on gross revenues. The proposal still needs to be approved by the MTA’s board. If approved, it would stay in place until ridership on Metro-North returns to normal levels. Currently, ridership is about 80% below what it was before the pandemic. The Grand Central Oyster Bar has closed two weeks after it reopened, due to lack of foot traffic. Its owners are hoping that its landlord , the Metropolitan Transportation Authority, will provide rent relief so it can resurface at some point.
Grocery stores were classified as essential businesses but some were still hit hard by the pandemic. Many supermarket chains have seen their business decline, and only three saw increases in foot traffic.
Related Companies has sued six of its retail tenants at the Shops at Columbus Circle in the Time Warner Center for nonpayment of rent. The lawsuits seek to recover a total of $7.5 million in unpaid rent and other charges that have accumulated since the start of the pandemic. In some cases, the retailers have not paid rent since March.
New York’s restaurants and bars continue to struggle as the pandemic enters its seventh month. Half of restaurants that were open before the pandemic may eventually close.
While restaurants can continue outdoor dining year-round, some restaurateurs are worried that addition won’t be enough to sustain them through the winter. Current capacity restrictions on indoor dining may not be able to fill the gaps for struggling businesses.
The restaurant chain Ruby Tuesday filed for chapter 11 bankruptcy, introducing with it plans to close 185 locations. The filing will leave the franchise with 236 operating restaurants.
National chains still face financial woes, although there are some signs of recovery within the retail sector of gyms and clothing stores. National retailers paid 86% of their September rent, 10% below what they paid in 2019, but slightly above last month’s 83%.
A 6,000-square-foot retail space at 106 Spring Street, which has sat largely empty for years, is heading to foreclosure. Owner SL Green Realty bought the property in 2019 from 60 Guilders and Carlyle for $79.5 million.
Prince Street saw the largest drop in asking rents, with pricing falling to $405 per square foot in the third quarter from $705 at the same time last year.
Office:
Deutsche Bank is exiting its current headquarters at 60 Wall Street and consolidating its workforce to the Time Warner Center in 2021. However, the coronavirus pandemic has accelerated its departure and employees could wait to return to the workplace until July 2021, when the Columbus Circle location opens.
Dropbox, a tech company, is the latest to go “virtual first,” meaning its employees will permanently work from home.
IBM is searching for 500,000 square feet to consolidate its existing Manhattan offices and has narrowed down the search to half a dozen buildings.
IWG is looking to close at least a fifth of its work centers in New York City. IWG has also shutt another Regus and a workspace under its Spaces brand. Those moves, combined with six New York City work centers that Regus and Spaces put into bankruptcy, make a total of 11 centers that have either closed or gone into bankruptcy.
Rudin Management is planning a makeover of its 1.2 million-square-foot office tower at 80 Pine Street in the Financial District. The 60-year-old building expects nearly 800,000 square feet of vacancy in the near future. The renovation project includes a new ground floor lobby and entryways. New storefronts with decorative glass curtain walls are also part of the plan.
The largest sublease block to hit the market came in the first quarter, with Time Inc. looking to sublet 221,400 square feet at 225 Liberty Street. Also in the first quarter, 151,400 square feet of sublease space from First Republic Bank hit the market at 410 Tenth Avenue.
Starr Insurance Companies is looking to sublet 190,900 square feet at 399 Park Avenue. Emblem Health has put up 163,000 square feet for sublease at 55 Water Street, while WeWork is looking to sublease 156,000 square feet at its headquarters on West 18th Street in Chelsea.
Hotels:
Hotels across the country are pivoting to become offices to survive the pandemic. In New York, the 607-room InterContinental Times Square was transformed into housing for doctors and nurses treating coronavirus patients. Then it started to offer rooms as offices. Now, the hotel will offer office space on a suite-by-suite basis.
The Roosevelt Hotel at 45 East 45th Street is shuttering after nearly a century due to the economy. The 1,015-key hotel is owned by Pakistan International Airlines and managed by United Hotels Company.
Many hotels that have had their securitized loans sent to special servicing recently received new appraisals. On average, they are coming in 29% lower than their pre-pandemic figures.
