Renovate or bust: New York’s aging offices face specter of obsolescence

Three-quarters of the city’s office buildings are more than 40 years old. Can they survive the pandemic?

New York Issue /April 14, 2022 07:30 AM By T.P.Yeatts

250 Broadway in Lower Manhattan, rebranded as One Park Place (Amtrust Realty)

New York City’s office market increasingly resembles the demographics of the nation: a land of haves and have-nots, with a shrinking middle class.

Two years after the pandemic sent white-collar workers home, office buildings across the metro area were only 37 percent occupied, according to March 16 card swipe data from Kastle Systems, a popular index for office use. That includes “trophy” spaces occupied by the big banks that have pushed workers hardest to return. 

Landlords don’t expect them to remain empty much longer. Companies still need dedicated workspace, they say, even if it serves a different purpose — as flexible, refined meeting places rather than 9-to-5 holding pens.

Assuming they are correct, there remains an essential problem: The bulk of Manhattan’s office property is ancient. The unweighted average age of office buildings across the city’s roughly 540 million-square-foot market is now “well over” 100 years, according to Colliers. About 75 percent was built before 1980, and 45 percent was built before World War II.

Age alone isn’t the fundamental issue, according to Ruth Colp-Haber, founder of Wharton Property Advisors and a 30-year veteran Manhattan tenant broker. It’s older buildings’ outdated layouts, features and functionality. With some exceptions, older buildings typically lack the column-free floors, high ceilings, gyms and cafes that tenants want in a workplace.

If tenants are going to commit to a long-term lease, they want that space to be special, Colp-Haber said. And while there are gems among the older stock, preference skews to the new and improved. Landlords either have it or they don’t. 

“We’ve definitely never seen anything like this — even remotely,” Colp-Haber said of current office market conditions. “We’re in the midst of a bear market in commercial real estate in New York, and the Class B buildings are going to be bearing the brunt of it.”

Have-nots to haves

The bifurcation between high- and low-quality space has been going on for years; the work-from-home boom only made the contrast more pronounced. Space that was once passable for companies that maintained large offices will no longer do as those firms redefine, and in most cases moderate, their workplace needs.

Among landlords of “value” properties, there is a belief that one can renovate one’s way into the upper echelon. 

“I don’t see Class B as a business I want to be in,” said Jonathan Bennett, president of AmTrust Realty, which is overhauling 250 Broadway across from City Hall to attract a major tech tenant. “I want to be in the Class A business.” 

Tony Malkin, chair and CEO of Empire State Realty Trust, maintains that the distinction between Class A and Class B has been “erroneously oversimplified,” and has framed his company’s largely Class B portfolio as part of the broader “flight to quality.” 

Well-located, energy-efficient buildings with amenities are “critical in all price ranges,” Malkin said on an earnings call in February.

“We offer office space of these important attributes at rents that are accessible to the broadest population of tenants, not just those who can afford or want to pay triple digits for brand-new buildings,” he added.

New York’s creative industries like publishing and architecture, as well engineering firms and nonprofits, have historically been renters of Class B offices. And in recent years, medical businesses have taken up aging space vacated by typical Class A renters like banks and law firms.

Loft-style Class B space is a draw for tech and other tenants in submarkets like Midtown South, Flatiron and Soho. In those enclaves, demand is booming, according to Duval & Stachenfeld’s Eric Menkes, who represents owners like RXR Realty, Savanna and Jamestown in lease deals at B buildings.

“They’re hitting the ball out of the park right now, and that has absolutely nothing to do with the fact that the buildings are Class B buildings,” Menkes said, declining to offer specifics on rents. “These buildings are not going back to the bank.”

Pronounced softness in other submarkets, like the Garment District and Midtown, including whole stretches of Third Avenue, suggests Class B stock far outweighs demand. 

The glut of space is due in part to downsizing flex-office companies, which took over much of the languishing lower-tier space as the business model boomed over the last decade, only to see demand evaporate during the pandemic, said Frank Wallach, executive managing director for research and business development at Colliers.

Over the last two years, WeWork, Knotel and similar firms have given back more than 4 million square feet of space, most of it Class B, he said.

“The question is, will there be enough demand in the post-Covid era to fill it up?” Wallach said. “What we’re seeing so far is the Class A and newer property is seeing the results first in the post-pandemic increase in demand.”

A “distraction play”

As tenants upgrade their offices, they are also taking less square footage — a consequence of hybrid work plans and column-free floors’ greater efficiency — causing softness in the market for even lower A-grade space in less central locations. Class A vacancy at year-end (17.9 percent) was higher than Class B vacancy (17.1 percent).

David Goldstein, branch manager of Savills’ New York office, described an ongoing “amenities arms race” among landlords below the top tier. On a recent tour of older buildings in Midtown, he and a prospective tenant played at guessing how many times the agent would say “amenity.”

“Agents are spending more time talking about the amenities of the building than the office space itself, because the office space is not that exciting in a lot of these buildings,” he said.

Goldstein called the tactics a “distraction play.”

“The reality is, a lot of the Class B stock has aged perhaps more quickly than anticipated,” Goldstein said. “Certain buildings just have physical limitations that can’t be overcome.”

For owners that could reposition an outdated property, there remains the issue of financing. Rising interest rates and construction and labor costs have made projects that won’t ultimately command top-dollar rents untenable. Lenders, sensing softness in the market, are hesitant to finance projects whose appeal to prospective tenants may be tenuous. 

A possible future for Manhattan’s obsolescent Class B office buildings can be glimpsed in Lower Manhattan, where developers have converted millions of square feet to residential and hotel use over the last three decades. A similar transformation in Midtown would be challenging given the submarket’s larger floor plates, which are not as well suited for residential repurposing due to fresh air and light requirements, according to architect Mark Ginsberg of Curtis + Ginsberg Architects. 

In the meantime, the central problem is demand, which experts say is markedly lower than it was before 2020 due in part to tenant migration outside New York. 

Some Class B tenants became owners during the pandemic, when money was cheap and pricing made buying more attractive, according to Michael Rudder of Rudder Property Group, which specializes in the conversion and sale of New York office condos.

The company helped convert a “weak” Class B building at 35 West 36th Street to a “creative” office condo building during the pandemic, he said. The project was approved in January 2020 and is now effectively sold out. 

“The whole project was a success,” Rudder said. “Had they done a leasing campaign, I think they would be dead in the water right now.”

Here’s where wealthy Russians have owned trophy real estate in the US

Calls for the government to seize assets amplify amid heightened scrutiny of Russian wealth in America

National /March 02, 2022 12:00 PMBy Katherine Kallergis and Adam Farence | Research By Adam Farence

Danil Khachaturov, Roman Abramovich, Vladislav Doronin, Oleg Deripaska (Getty, OKO Group, iStock)

As sanctions intensify against Russia in response to its invasion of Ukraine, so has scrutiny of Russian wealth in America, from yachts, jets and businesses, to, of course, real estate. The U.S. government is moving to freeze the assets of sanctioned Russian businesses and oligarchs, and elected officials are calling for the outright seizure of properties.

“We are joining with our European allies to find and seize your yachts, your luxury apartments, your private jets,” President Joe Biden said Tuesday, addressing Russian oligarchs in his State of the Union speech Tuesday. “We are coming for your ill-begotten gains.”

Billionaire Russian businessmen and other members of the country’s elite have grabbed headlines over the last decade by scooping up luxurious properties for top dollar, particularly in New York City and South Florida. Like other foreign buyers, many have concealed their identities by making acquisitions through LLCs or offshore trusts.

“For years Manhattan has been one of the most popular safe harbors for Russian oligarchs to park their cash, especially via ultra-high-end apartments,” Manhattan Borough President Mark Levine tweeted over the weekend. “It’s time to start seizing their properties.

David Friedman, co-founder of the wealth intelligence platform WealthQuotient, estimates that about 5,500 ultra-high net worth Russian individuals, or less than .01 percent of Russia’s total population, hold about $240 billion in real estate worldwide. That averages out to $43 million in real estate per individual, most of which is likely outside of Russia, Friedman said.

The Real Deal analyzed property records, published reports and other data sources to put together a snapshot of where wealthy Russians have bought and sold top-tier real estate in the U.S. It’s important to note that although some of the individuals listed below have been linked to Russian President Vladimir Putin and the Kremlin, none, other than Oleg Deripaska, are currently on the U.S. sanctions list.https://afarence.github.io/RussianOligarchMap/Leaflet map created by Adam Farence | Data by © OpenStreetMap, under ODbl.

Roman Abramovich
Townhouses at 9, 11, 13 and 15 East 75th Street and co-ops at 215 and 225 East 73rd Street in New York (sold)
1200 Ridge Wildcat Drive and 303 Aspen Way in Snowmass, Colorado

Roman Abramovich (Getty)

Roman Abramovich, who made his fortune in energy and metals in the 1990s and early 2000s, bought four townhouses on New York City’s Upper East Side, three of which he planned to combine into a megamansion. The mogul, who also owns the London-based soccer club Chelsea F.C., transferred ownership of the New York properties to his ex-wife Dasha Zhukova in 2018 for more than $92 million.

Abramovich also owns two homes in Snowmass, Colorado, near Aspen. Property records show he paid $36.4 million for the larger of the two, a 200-acre estate in the Wildcat Ridge neighborhood, and $11.8 million for the Aspen Way home, both in 2008.

Eugene Shvidler
Co-op at 785 Fifth Avenue in New York

Eugene Shvidler (Getty)

Eugene Shvidler, a billionaire Russian-American gold mining investor and oil tycoon who is reportedly best friends with Abramovich, owns a co-op at The Park V on Fifth Avenue in New York. He paid $24.5 million for the two-bedroom, 5,000-square-foot unit in May 2018. Shvidler, like Abramovich, made his fortune during the privatization of the oil industry in Russia.

Dmitry Rybolovlev
North County Road estate in Palm Beach (sold)
Penthouse at 15 Central Park West in New York

Dmitry Rybolovlev (Getty)

Russian fertilizer billionaire Dmitry Rybolovlev’s known real estate purchases include an $88 million penthouse at 15 Central Park West, which he bought for his daughter, and an over 6-acre oceanfront estate in Palm Beach, which he split into three parcels and sold off. Former President Donald Trump sold the Palm Beach mansion to Rybolovlev in 2008 for $95 million, then a record for Florida residential sales, and Rybolovlev sold the divided properties for more than $108 million in 2016, 2017 and 2019.

The homes were also a major source of contention in Rybolovlev’s divorce with his ex-wife, Elena.

Aras Agalarov
Unit 7064 at Palazzo Del Sol, 7064 Fisher Island Drive in Miami Beach (sold)

Aras Agalarov (Getty)

Azerbaijani-Russian billionaire real estate developer Aras Agalarov, a friend of Putin and former President Donald Trump, owned a condo at Palazzo Del Sol on Fisher Island, an exclusive island in Miami Beach accessible only by boat, ferry or helicopter. Agalarov sold his four-bedroom, 4,738-square-foot unit in 2018 for about $8.5 million, taking a loss on the property he had bought two years earlier for $10.7 million.

Vladislav Doronin
Star Island Drive mansion in Miami Beach

Vladislav Doronin (OKO Group)

Russian-born American billionaire real estate developer Vladislav Doronin lives on Star Island in Miami Beach, where his neighbors include Gloria and Emilio Estefan and Sean Combs, a.k.a. Puff Daddy. Doronin, who said in a statement that he denounced the aggression of Russia on Ukraine, owns the Aman resorts chain of ultra high-end hotels, as well as his real estate development firm OKO Group, which has projects in New York and Miami. Doronin reportedly paid $16 million in 2009 for a waterfront home on Star Island previously owned by NBA star Shaquille O’Neal.

Oleg Misevra
Penthouse at Trump Hollywood, 2711 South Ocean Drive, in Hollywood, Florida

Oleg Misevra (Getty)

Oleg Misevra, described by the Miami Herald as a Russian coal magnate who has earned Putin’s praise, acquired a six-bedroom, 8,170-square-foot penthouse at Trump Hollywood for $6.8 million in 2010, property records show.

Danil Khachaturov
Trousdale Estates mega mansion in Beverly Hills, California

Danil Khachaturov (Facebook)

Russian tycoon Danil Khachaturov, who once held a controlling stake in the country’s largest insurance agency, paid $35 million two years ago for a megamansion in Beverly Hills’ Trousdale Estates neighborhood, according to Dirt.

Oleg Deripaska
Homes at 11 East 64th Street and 12 Gay Street in New York

Oleg Deripaska (Getty)

A Russian oligarch and billionaire founder of aluminum giant Rusal with close ties to Putin, Oleg Deripaska owned two homes in New York at 11 East 64th Street and 12 Gay Street. Deripaska, who has been banned from entering the U.S., had ownership of the two properties transferred to relatives. He paid $42.5 million and $4.5 million for the two homes, respectively. U.S. officials placed him on a sanctions list in 2018 over his alleged involvement in murder, money laundering, bribery and racketeering, officials said at the time. He has also been linked to Russian organized crime, according to a Trump administration report.

Alexei Kuzmichev
33 East 74th Street in New York

Alexei Kuzmichev (LetterOne Group, CC BY 2.0, via Wikimedia Commons)

Russian billionaire Alexei Kuzmichev, who made his fortune as head of Alfa Group, the owner of Russia’s Alfa-Bank, paid $42 million for an Upper East Side apartment at 33 East 74th Street in New York in 2016. He also bought a unit in the adjacent building for $15.5 million, which he reportedly wanted to connect to the unit next door. It’s unclear whether Kuzmichev still owns the properties.

Kuzmichev is also a co-founder of the Luxembourg private equity firm LetterOne. Alfa-Bank was sanctioned by the U.S. government on Feb. 24.

Keith Larsen contributed reporting.

Despite calling for return, financial titans shed NYC office space

JPMorgan has reduced its NYC footprint by 700K square feet since 2020: report

JPMorgan Chase & Co. CEO Jamie Dimon (Wikimedia, Getty Images, iStock)

In a city whose office market depends heavily on financial institutions, several key tenants are downsizing.

JPMorgan Chase, New York City’s largest office tenant, cut its commercial footprint by 400,000 square feet last year, Crain’s reported. The bank, which has said it plans to “significantly reduce” its global office footprint in the coming years, also downsized by 300,000 square feet in 2020.

The financial institution still rents 8.7 million square feet in the city, according to Crain’s, but an entity of its size — particularly one whose CEO was at the vanguard of the return-to-office movement last year, can create a ripple effect if other firms decide to follow suit.

According to Crain’s, Wells Fargo reduced its commercial space in the city by 600,000 square feet last year. Bank of New York Mellon, financial index provider MSCI and insurance firm Voya Financial are also downsizing their nationwide footprints.

JPMorgan spokesperson Michael Fusco told the publication that the firm remains “committed to New York City and planning for the next 50 years,” referencing its new headquarters under construction at 270 Park Avenue. Approximately 14,000 of the bank’s employees are expected to work out of the office.

But JPMorgan’s actions indicate that it might be hedging its bets. The bank is looking to sublease 700,000 square feet at 4 New York Plaza in the Financial District and 100,000 square feet at its Hudson Yards office at 5 Manhattan West, Bloomberg reported Wednesday.

“Remote work will change how we manage our real estate,” JPMorgan Chase CEO Jamie Dimon wrote in a letter to shareholders last year.

Office landlords are still reeling from the pandemic, with the latest market report in Manhattan indicating that office availability reached a new high in February. Just under 94 million square feet of office space were available to rent in Manhattan last month, according to a Colliers report.

The availability rate, meanwhile, hit 17.4 percent, a 74 percent increase from the start of the pandemic. Average asking rents across the borough are up only slightly from their pandemic lows, at $74.88 per square foot, nearly 6 percent below pre-pandemic levels.

YIMBY Scopes Panoramic Views From Olympia At 30 Front Street In DUMBO, Brooklyn developed by Fortis Property Group

Olympia. Photo by Michael Young

BY: MICHAEL YOUNG 8:00 AM ON FEBRUARY 7, 2022

YIMBY went to check out the views from Olympia, a 33-story residential building at 30 Front Street in DUMBOBrooklyn. Designed by Hill West Architects and developed by Fortis Property Group, the 401-foot-tall sail-shaped tower will yield 76 condominiums designed by Workstead. The units will come in one- to five-plus-bedroom layouts with sales and marketing led by Fredrik Eklund and John Gomes of the Eklund Gomes Team at Douglas Elliman and Karen Heyman at Sotheby’s. Urban Atelier Group is managing the ongoing construction, Manhattan Concrete created the superstructure, and King Contacting Group is in charge of the CMU work, exterior insulation finish systems, and roofing for the project, which is bound by Front Street to the north, Washington Street to the east, and York Street to the south.

A good deal of progress has occurred since our last update in September, when façade installation had recently passed the halfway mark on the main tower. Now the building is largely enclosed in its system of large windows and dark gray paneling.

Some of the curved metal corner panels around the edges of the flat southern elevation also saw visible progress.

The cladding for the sloped crown will soon be complete, finishing off the curved profile and blending cohesively with the rest of the exterior.

YIMBY got to go up to the 33rd floor to check out the views from the expansive balcony. A major selling point for the property is its unobstructed view of the nearby Brooklyn Bridge with the recently completed two-acre Emily Warren Roebling Plaza directly underneath, the Statue of Liberty and New York harbor, and the World Trade Center complex towering over the Financial District across the East River. All of these elements creative a picture-perfect scene from this sprawling penthouse residence, which is known as Penthouse B and is currently listed at $19.5 million with five bedrooms and 4.5 bathrooms measuring 4,298 square feet. The outdoor space is an additional 552 square feet.

Further up the river are the equally iconic Manhattan, Williamsburg, and Queensboro Bridges. In the distance are the rising Hudson Yards and Manhattan West master plans, and the architectural mix of supertall residential towers and office buildings from the Empire State Building to One Vanderbilt, the Chrysler Building, and Billionaires’ Row.

Also visible is the growing waterfront skyline of Long Island City and Hunters Point South, Queens, and Greenpoint Landing in Brooklyn.

Olympia will feature over 38,000 square feet of indoor-outdoor amenities spread across three floors in the form of The Garden, The Club, and The Bridge. The Garden will measure 3,515 square feet with a triple-height lobby space and a commissioned sculpture by Jacob Hashimoto, a custom-designed mahogany lobby desk with inlaid red jasper marble counter and inset chamfered edges, Rain Drop Black-mosaic flooring and a variety of wall finishes including raked maple and hand-raked plaster, a lounge with double-height ceilings lined with light ash wood flooring and maple millwork, custom built-in banquettes and lounge furnishing throughout, a private landscaped garden with curated plantings by MPFP, a porte cochere, and a pet spa located just past the lobby via a side entrance.

The 7,237-square-foot Club is tucked in the cellar level with a two-lane bowling alley with custom bleachers and leather cushions, a playroom for kids, a flexible fitness and wellness space for yoga, pilates, barre classes, and personal training, a fitness center, a boxing gym, a lounge with a kitchenette and dining area, screening room, and billiards tables available for private parties or everyday use, a spin studio with a virtual instructor on fully customizable Schwinn virtual trainer spin bikes and a Wellbeats flat screen HD display, and locker rooms with a towel drop-off station, showers, and digital locking systems.

The largest amenity tier, The Bridge, measures 24,476 square feet and is located on the 10th floor. The Bridge features a 60-foot-long, two-lane indoor lap pool, a treatment room, a dry sauna and steam room, a juice bar, an outdoor tennis court with views overlooking the Brooklyn Bridge, a 58-foot-long outdoor swimming pool and an additional hot tub, a shipwreck playground for children, a water park with geysers, and an outdoor lounge and barbecue space with al fresco dining.

Olympia is expected to be finished in the latter half of 2022.

Hotels launch ad campaign after omicron sinks occupancy

Attacked by virus and city government, owners renew call for help

New York /January 31, 2022 12:32 PMBy Lois Weiss

Hotel Association of New York City CEO Vijay Dandapani (Getty, iStock)

Hotel Association of New York City CEO Vijay Dandapani (Getty, iStock)

How do you sell relief?

With occupancy back down to 42.5 percent, the city’s hotel owners launched a web and TV campaign Monday to tug at the hearts and minds of elected officials.

Specifically, they want financial aid and a break on late tax payments.

“We need real property tax relief. We had a liquidity crisis and now have a solvency crisis,” said Vijay Dandapani, president and CEO of the Hotel Association of New York City, told The Real Deal.

The group did not say how much it is spending on the effort.

The trade group’s new campaign website, StayNYC.com, says, “Saving hotels would be a downpayment on our recovery.” It adds, “Common sense measures like property tax debt relief and assessments that more fairly represent the current value of hotels will keep hotels open and workers employed.”https://www.youtube.com/embed/2lgfOAlDV60

By debt relief, the hotel owners mean a lower interest rate than 13 percent — they would prefer zero — on overdue property taxes. They made a similar call one year ago, and in December released a report showing their taxes as a percentage of revenue had tripled in 2020, to 30 percent.Read more

The new website says that prior to the pandemic, city hotels employed 50,000 people — largely “immigrants and people of color” — accounted for $3.2 billion in revenue and supported $22 billion in spending from global tourism.

“The future for hotels is even less certain,” said Dandapani, who is hopeful that new Mayor Eric Adams and the overhauled City Council will craft targeted measures that drop assessments, reduce the penalty for unpaid taxes and help hotels stay open.

The association is already suing the city in federal court to strike down a law mandating severance pay of $500 per employee for 36 weeks for hotels that did not re-open by November.

“It’s money that the hotels simply don’t have,” wrote David Paz, president of Omnia Group, which owns the Sister City hotel, in a Jan. 27 Crain’s op-ed.

A few hotels did open, perhaps to avoid the penalty, but Dandapani said 145 have closed since the pandemic began.

The city delivered a blow to hotel developers as well by requiring a special permit to build hotels, a law that is expected to stifle nonunion hotel projects. The measure was passed as a favor to the hotel workers union, although in a few years it could help existing hotels by limiting competition. A pipeline of supply that pre-dated the law includes a Ritz-Carlton opening in May, a Virgin Hotel opening this summer and the Fifth Avenue Hotel opening this fall, all in Nomad.

Before Adams was sworn in, Dandapani told him the industry was looking for “safety and cleanliness.” But the ad campaign is more about money. The city’s hotel property taxes are the highest in the country and “inequitable, unfair and unsustainable,” the trade group leader said.

Of the city’s new proposed tax assessments, he said, “It doesn’t reflect the fact that in the first year of the pandemic, revenues were down nearly 65 percent from 2019 and down 44 percent in 2021,” he explained. “We need short-term real property tax relief.”

The new assessments, released Jan. 18, will affect taxes beginning in July. But these were calculated by the city’s Finance Department when hotels were rebounding. Their occupancy rate was 82 percent in December — the highest in two years — but plunged to 43 percent last week. “Omicron took the wind out of our sales,” Dandapani punned.

The assessments push hotels’ average billable values up by 5.9 percent citywide. Many owners figure to challenge their assessments by the March 1 deadline.

“You have to be in a cave in Afghanistan not to file,” Dandapani said.

Amazon eyeing 400K sf office in Jersey City

E-commerce giant close to inking lease with Mack-Cali Realty’s Harborside 1

Tri-State /November 02, 2021 06:30 PMTRD Staff

Jeff Bezos & 50 Hudson Street in Jersey City (loopnet.com, Getty Images)

Amazon’s expansion in the tri-state area continues as the e-commerce giant reportedly eyes space in Jersey City.

The company is close to a deal to lease 400,000 square feet at Mack-Cali Realty’s Harborside 1 in Jersey City, Bloomberg reports, citing people familiar with the potential deal. Tax breaks are available for the waterfront property at 150 Hudson Street, the developer’s website reveals.ADVERTISING

Harborside 1 is an eight-story, 400,000-square-foot building according to Mack-Cali’s website.

The company this spring completed more than $100 million in renovations on its Harborside campus, which spans 4.3 million square feet. The improvements at Harborside 1 include a new facade, new lobby and terrace views of Manhattan and the Hudson River.

The REIT was hoping the renovated spaces would attract media and creative tenants, Ed Guiltinan, Mack-Cali’s senior vice president of leasing, told the New York Post in May.

Jersey City was a contender in the competition for Amazon’s HQ2, offering up to $5 billion in economic incentives to land the corporate campus. Ultimately, Amazon founder Jeff Bezos chose to split HQ2 between Long Island City and Arlington, Virginia.

Things didn’t go so well for the company’s development in Queens. Grassroots organizations bemoaned the $3 billion in city and tax incentives that the company was poised to receive, not to mention the helipad that was to be part of the campus. Activists even objected to the high-paying jobs, saying the new employees would drive up housing prices.ADVERTISEMENT

On Valentine’s Day in 2019, Amazon abandoned its plans at the site.

However, Amazon’s failure in Queens hasn’t soured the company on the New York metro area. But it has focused it search for office space on Manhattan rather than the outer boroughs.

In December 2019, the tech giant signed a 335,000-square-foot lease with SL Green Realty for an office near Hudson Yards. The lease at 410 Tenth Avenue did not involve any tax breaks.

In March 2020, Amazon doubled down on New York City, buying the Lord & Taylor building from WeWork for $1.15 billion. The purchase price on the 660,000-square foot building at 424 Fifth Avenue worked out to about $2,000 per square foot.

[Bloomberg— Holden Walter-Warne

601 West 29th Street completion In Hudson Yards, Manhattan

Façade work is nearing completion on 601 West 29th Street, a 695-foot-tall residential skyscraper in Hudson Yards and number 19 on our year-end construction countdown. Designed by FXCollaborative and developed by Douglaston Development, the 60-story structure is also known as “Tower A” in a two-building development alongside 606 West 30th Street, which has yet to begin rising over Midtown, Manhattan. 601 West 29th Street will yield 703 market-rate and 235 affordable housing residences, 50,000 square feet of amenity space, and 15,000 square feet of retail space. Levine Builders is constructing the property, which is bound by Eleventh Avenue to the east, West 29th Street to the south, and West 30th Street to the north.

601 West 29th Street. Photo by Michael Young

BY: MICHAEL YOUNG 8:00 AM ON DECEMBER 13, 2021

Façade work is nearing completion on 601 West 29th Street, a 695-foot-tall residential skyscraper in Hudson Yards and number 19 on our year-end construction countdown. Designed by FXCollaborative and developed by Douglaston Development, the 60-story structure is also known as “Tower A” in a two-building development alongside 606 West 30th Street, which has yet to begin rising over Midtown, Manhattan. 601 West 29th Street will yield 703 market-rate and 235 affordable housing residences, 50,000 square feet of amenity space, and 15,000 square feet of retail space. Levine Builders is constructing the property, which is bound by Eleventh Avenue to the east, West 29th Street to the south, and West 30th Street to the north.

A great deal of progress has occurred on the exterior since our last update in April, when curtain wall installation had just begun. Now nearly all of the glass and metal panels are in place on the L-shaped building.

The construction elevator remains attached to the southern corner of the edifice, while the façade for the podium along West 29th Street is quickly shaping up.

From afar 601 West 29th Street blends into the Hudson Yards skyline, contributing nicely to the density of the cluster and extending it to the south toward Chelsea. The structure stands out from its neighbors with its white grid of squares on the northern and southern faces, while the taller rectangular segment facing east and west utilizes the same proportions and scale but with a dark-colored grid of lines between the floor-to-ceiling windows. Multiple wooden water towers of varying heights and a small mechanical extension are tightly perched above the flat roof parapet.

As of now, the structure enjoys a fairly isolated position with only 15 Hudson Yards nearby, but it will soon be joined by 606 West 30th Street, which will be built in the middle of the same parcel as 601 West 29th Street. The photographs below taken from across the Hudson River would see the most notable change in perspective as the majority of the tower would be obscured from this angle.

Photos of 601 West 29th Street. Photo by Michael Young

Residential amenities at 601 West 29th Street will include multiple tenant lounges, a gym with fitness studios, an outdoor swimming pool, multiple outdoor terraces, indoor and outdoor pet spaces, bike storage, and parking for 186 vehicles. The closest subway to the site is the 7 train at the Hudson Yards station in Bella Abzug Park to the north.

601 West 29th Street should likely be finished in the first half of 2022, perhaps by late spring or early summer at the latest.

Humans vs machines: The fallout from Zillow’s iBuying fiasco

How Zillow’s model differs from other iBuyers’

National /November 05, 2021 04:51 PMBy Erin Hudson

 Zillow CEO Rich Barton (Getty, iStock)

Zillow CEO Rich Barton (Getty, iStock)

For all the talk about how Zillow’s iBuying fiasco was a triumph of humans over machines, it’s worth remembering one simple fact: Someone had to tell the bots which data to use.

Agents and rival homebuyers are crowing about how Zillow’s apparent overreliance on a faulty algorithm led it to pay thousands over market prices. They say it shows the importance of on-the-ground expertise in a business that perhaps more than any other depends on human-to-human interactions.

“It reinforces the need for a local area expert when you’re buying or selling a home,” said Babbi Gabel, a top agent in the busy iBuying nexus of Phoenix. “Real estate is about relationships.”

Yet the answer may be more nuanced. After all, competitors have long used computer programming to identify, buy and sell homes at a profit. Rather than some sort of post-apocalyptic tale of how ragtag rebels faced down Skynet, it’s more the story of how hubris overtook good judgement.

“Investors should ask questions about execution,” said Tom White, an analyst at D.A. Davidson & Co. who rates Zillow a buy. “They clearly screwed up.”

Zillow Offers did use pricing specialists and occasionally agents to help resolve discrepancies in property values and to find valid comparative prices, a person familiar with the company said, speaking on condition of anonymity. Yet Zillow relied mostly on its much-touted, and long-derided Zestimate and stripped out most human interaction.

Rivals such as RedfinNOW and HomeVestors, by contrast, built in human checkpoints to review automated prices and underlying assumptions. In some cases, they inspect a home they’re considering buying. Offerpad’s CEO Brian Bair said in a statement that it relies on “local market expertise,” without elaborating. Opendoor says on its web site that it hires real estate professionals to man pricing teams.

RedfinNOW uses extensive renovations to deliver upside to ensure it can sell a home for more than it paid. Its specialists also manually review Redfin’s own comparative analysis for every offer it makes. Redfin’s licensed home inspectors visit every home and take 3D scans of the property.

“Those are things that we think humans are really good at,” said Quinn Hawkins, who heads RedfinNOW.

Orchard, a startup that provides loans based on a previous home’s value and will manage its sale, uses an automated valuation system that relies on data from public records, a structured interview with the homeowner, a virtual tour and photos. Yet that’s only 70 percent of the process. The rest of the time, or when there aren’t enough comparable properties, humans step in.

“The key is the system needs to be self-aware to know when it’s confident and when it’s not,” said Orchard CEO Court Cunningham.

Then there’s Zillow’s own obsession with growth.

“We made a decision that we needed to increase our acquisition pace” even as the pricing model failed to keep up, Allen Parker, Zillow’s CFO, said on a conference call Tuesday with analysts.

Zillow’s stumble probably almost certainly isn’t the end of the road for iBuying. Younger people, more at ease with clickable purchases, may seek the path of least resistance when it comes to buying and selling homes.

Even so, Zillow’s sudden exit spooked investors. Its shares slid 32 percent this week bringing the loss since a peak in February to 67 percent.

Trulia co-founder Sean Black, who sold his site to Zillow for $2.5 billion in 2015, said he’s rooting for the company. The stock’s dramatic slump this week is a buying opportunity provided “you have the stomach for the volatility,” said Black, who holds Zillow shares.

Even so, Black said home pricing needs a human to conduct a qualitative review.

“Homes are not a commodity,” said Black, who has since founded home finance startup Knock. “You need a human element to it.”

Manhattan retail market ticks up, indicating slow recovery

Availabilities decrease, leasing increases in Q3: CBRE

New York /October 14, 2021 03:30 PMBy Sasha Jones

Retail availabilities decreased, but leasing increased in the third quarter (iStock, Wikimedia, LoopNet)

Retail availabilities decreased, but leasing increased in the third quarter (iStock, Wikimedia, LoopNet)

Manhattan’s retail market is showing slow signs of recovery aided by a few major deals, according to a new report by CBRE.

Direct ground-floor availabilities across 16 of Manhattan’s shopping corridors decreased in the third quarter of this year, from 290 to 282 quarter-over-quarter. Though the figure is 11 percent higher than it was a year prior, the slight decrease marked the first decline in availability in the region since 2019.

Leasing activity, which includes new leases and renewals, also increased for the first time since 2019. Velocity rose roughly 4.4 percent from the prior quarter but remained 45.5 percent below the rate recorded the previous year.

The area with the highest leasing velocity was NoHo, with over 89,000 square feet transacted in just two deals. That’s thanks to Wegmans Food Market taking over K-Mart’s 89,000-square-foot Astor Place flagship store at Vornado’s 770 Broadway.770 Broadway and 324 Lafayette Street (Wikimedia, LoopNet)

770 Broadway and 324 Lafayette Street (Wikimedia, LoopNet)

The other deal was Kyu Restaurants, a modern Asian fusion eatery based in Miami, which announced a 6,600 square-foot lease at 324 Lafayette Street.

Flatiron/Union Square scored the second-highest leasing velocity in the third quarter with over 52,000 square feet closed across six transactions.Read more

However, average asking rent did not see much improvement. Rent in Manhattan’s retail corridors declined for the 16th consecutive quarter, falling to $605 per square foot. That’s a 1.6 percent decline from the second quarter and a 8.3 percent drop from the prior year.

The report comes as the city introduces the Key to NYC mandate, which requires customers to provide proof of vaccination to participate in activities, such as indoor dining. Simultaneously, the delta variant has posed yet another threat to businesses.

However, the city’s gradual return of tourists and office workers marches on.

The Times Square Alliance said the landmark over Labor Day Weekend saw as many as 255,000 visitors — the highest number since the pandemic began, but far less than pre-pandemic levels.

An average of 36 percent of the workforce in top U.S. cities returned to offices in the week of Oct. 4-8, according to data from Kastle Systems reported by the Wall Street Journal. The figure marked the second consecutive week of growth after an average of 35 percent of the workforce swiped in during the week ending Oct. 1. It’s also a decent jump from the week of Labor Day — an initial target return date for many companies — which saw an average of 31 percent clock in.

“The city’s economic fundamentals continue to strengthen with further improvement expected as more people return to pre-Covid routines,” Nicole LaRusso, CBRE senior director of research and analysis, said in a statement.

Lost without office workers, Midtown storefronts struggle to find tenants

Retail vacancies approached 30% this summer, far outpacing city’s residential areas

New York /October 07, 2021 02:17 PM

October 07, 2021 02:17 PMBy Sasha Jones

Vacancy rates for Midtown storefronts have more than doubled compared to pre-pandemic figures (iStock)

As resurgent Covid caseloads kept New York City’s office workers at home through the summer, retail corridors that depend on their foot traffic struggled to fill empty storefronts.

Just under 30 percent of retail storefronts in the Grand Central and Midtown East business districts — home to 15 percent of the city’s office stock — remained vacant this summer, more than double the 10 to 15 percent vacancy rates seen before the pandemic, according to a report by the Real Estate Board of New York.

Madison Avenue also saw a jump in vacancies, with 28 percent of storefronts unoccupied, up from 19 percent in 2018.

In comparison, residential neighborhoods in Manhattan, Brooklyn and Queens had storefront vacancies ranging from 14 percent to 20 percent — which, while still elevated, were much closer to pre-pandemic rates.

“It’s clear from these findings how critical the link is between the recovery and success of the City’s once vibrant retail sector and a full, safe return of office workers,” REBNY President James Whelan said in a statement.Read more

It wasn’t just retail landlords who were reeling. Office asking rents fell 4.2 percent in the second quarter, while the office vacancy rate hit a 30-year high of 18.3 percent, according to a separate report by the Office of the State Comptroller.

The total market value of the city’s office buildings, estimated at $172 billion in fiscal year 2021, fell nearly 17 percent in the fiscal 2022 assessment, the first decline in total office property market values in at least two decades. Of the $1.7 billion in property tax revenue the city stands to lose in fiscal 2022, which began on July 1, more than half will be driven by the drop in office building valuations.

According to the REBNY report, the city lost 631,000 jobs last year, with leisure and hospitality accounting for 250,000 losses. The retail sector shed over 67,000 jobs.

Only 49 percent of the city’s jobs have since returned, according to the report, leaving New York well behind the national recovery rate of 90 percent.

Still, those seeking signs of recovery should look below ground: Subway ridership had returned to nearly 50 percent of its pre-pandemic levels by early September, up from 20 percent in the spring of last year.