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.

German investor buying 100 Pearl Street office tower for $850M

Sellers GFP and Northwind oversaw $250M renovation of property formerly known as 7 Hanover Square

New York /September 30, 2021 09:58 AMTRD Staff

German investor buying 100 Pearl Street office tower for $850M

100 Pearl Street in NYC, GFP Real Estate Co-CEO Eric Gural, Northwind Group founder Ran Eliasaf (Google Maps, GFPRE, Northwind Group)

GFP Real Estate and the Northwind Group have agreed to sell the tower at 100 Pearl Street — previously known as 7 Hanover Square — to German investor Commerz Real.

The price for the building was $850 million, or $900 per square foot, according to the Commercial Observer. Cushman & Wakefield arranged the transaction.

The office building spans just under 1 million square feet and was recently renovated for $250 million. Changes to the 1983 building included a new lobby, infrastructure improvements, the addition of a food hall and the creation of a tenant-exclusive rooftop and amenity lounge.

Ownership of the building between GFP and Northwind has been brief, although GFP is staying on as part of a long-term management agreement. The two companies acquired the building in 2018 for $308.5 million. It wasn’t long, however, before the companies began looking for an equity partner.

They eventually found one in TPG Real Estate Partners, which agreed to join the purchase and repositioning of the building as a majority stakeholder. The stake it purchased valued the building at $600 per square foot, or approximately $585 million overall, The Real Deal previously reported.

The office building is 96 percent leased and 92 percent of tenants are locked in to the building until at least 2050, the Commercial Observer reports. Among its tenants are NYC Health + Hospitals, which agreed to take up 500,000 square feet for 25 years, and the Securities and Exchange Commission, which signed a 20-year lease.

Germany-based Commerz Real has proven to have a healthy appetite for big commercial real estate purchases stateside. The firm purchased an office building in the Fulton Market section of Chicago in 2019 for $175 million, one of the biggest office sales in the city that year. The arm of Commerzbank also agreed to purchase the NYU Langone Medical Center for more than $330 million in 2018.Read more