WeWork was once valued at $47 billion. Now, the office-sharing company is in the throes of the bankruptcy process after its Monday filing. It has about $16 billion in long-term leases, which the company has been renegotiating. (Other than being the latest buzzy company to fall from grace, WeWork has been a key client for commercial real estate landlords already struggling with an inconsistent return-to-office patterns due to Covid.) The move plunged WeWork into a troubling new chapter of its staggeringly sharp and quick downfall, which was already fodder for a miniseries starring Jared Leto as founder Adam Neumann. For his part, Neumann, who stepped down as CEO in 2019 and received hefty payouts, called the bankruptcy filing “disappointing.”
By Lois Weiss, NY Post, Published Oct. 27, 2023, 8:57 a.m. ET
Storefronts from Soho to the Upper East Side dazzle as tenants race to gobble up space around Gotham.iStockphoto/AFP/Getty Images
Not only has the retail apocalypse caused by the pandemic passed, Manhattan has rebounded so fast that prime locations are becoming hard to find.
“Retail is on fire,” said Eric Le Goff of Retail by Mona. “From Meatpacking to Williamsburg, all these areas are on fire.”
In recent years, rents on upper Madison Avenue between 59th Street and 86th Street had fallen into the $600s per foot. Now, a bevy of 75 transactions have pushed rents back toward $1,000 per foot.
The most recent lease was with Dolce & Gabbana which snagged a 23,338-square-foot former Hermès women’s store at 693 Madison Ave. after the other retailer moved down the block to the larger 706 Madison Ave. last year.
Additionally, Sotheby’s will take over the former Whitney Museum in the Breuer building at 945 Madison, adding new life to that stretch.
“There is a reduced amount of inventory,” said Matthew Krell of Alvarez & Marsal Property Advisor
Both Madison and Fifth avenues are going through many store changes
Dolce & Gabbana will move to the former Hermès space on Madison.
The opening of Tiffany & Co.’s redevelopment will allow its sister LVMH brand, Louis Vuitton, to move into the former Nike space to its east that Tiffany had occupied during its renovation.
Louis Vuitton will develop a new tower at 1 E. 57th St. and engulf 743 Fifth Ave., now occupied by brand cousin Hublot, sending it into the market to seek a new spot.
Gucci has renewed its large store on the Fifth Avenue base of Trump Tower. Swarovski is opening soon at 680 Fifth. Rolex is building its own tower at 665 Fifth Ave., while Marc Jacobs will take over the former Armani X on the north corner of East 51 Street at 645 Fifth Ave.
The Gucci store at the base of Trump Tower on Fifth.
The area closer to 42nd Street is lagging, however, due to numerous big-box storefronts.
One problem for the entire retail market is that it takes so long to get deals done.
“You may have an agreed-upon term sheet, but you are not getting someone swinging hammers for a year,” said Matthew Chmielecki of CBRE. “The least scientific way to measure a market is to count empty storefronts.”
Fun new spaces like Electric Shuffle are opening.
For instance, a new 10,000-square-foot deal in the base of the Virgin Hotel will bring Electric Shuffleboard to the city next spring.
John Few, of SRS Real Estate Partners, represented the concept.
“It has a very well-thought-out food and beverage program and will be good for dates and corporate events,” said Adam Weinblatt of Newmark who, along with Richard Tang of the Lam Group, represented the hotel, which has already scored a winner with Swingers minigolf.
In Noho, the 32,400-square-foot former Showfields space on Lafayette Street is up for grabs with Retail by Mona. Its asking rent is $3.5 million.
Across Lafayette, hip sneaker company Kith expanded into a big footprint.
“It’s madness with tons of people,” said Brandon Singer of Retail by Mona. “It’s like an upscale Times Square as it’s slammed and they’re not just looking, but shopping.”
On Broadway and on other Soho streets, many shops are preparing for their openings next spring while Meatpacking continues to see commitments by both luxury automakers and luxury retailers.
A revived five-building retail corridor is luring top brands to Gansevoort Row.
Saint Laurent, for instance, signed a 13,000-square-foot lease at 70 Gansevoort St., part of the Aurora Capital Associates and William Gottlieb Real Estate street revival.
“It’s full of energy and that neighborhood has transformed over the last five years,” said Adam Henick of Current Real Estate. “Gansevoort Row is beautiful with busy restaurants and popular retailers.” However, Times Square is still suffering despite lots of foot traffic.
“Not only have some of the large boxes sat vacant because it’s hard to find the right user, but the challenges the city has undergone the last few years have not helped,” said Henick.
The 245,000-square-foot retail in the base of the former New York Times building is in receivership, although the huge Bowlmor on West 44th St. is open, as is Los Tacos No. 1.
“Larger tenants are looking at it,” said Chmielecki, the agent for the block. “It’s hard to overstate the excitement in the retail market.”
The construction landscape in New York is slowing, with fewer construction starts taking place in 2023 compared with recent years.
This year, developers already have completed 8.3 million square feet across the first three quarters and are on pace to finish less than 10 million square feet, considering construction starts have declined in the past two quarters.
The projected year-end total is a notable drop, compared with the nearly 16 million built in 2022, and the 11 million built in both 2021 and 202
Adrian Ponsen, CoStar’s national director of industrial analytics, said the root cause of the slowdown is “the series of interest rate increases initiated by the Federal Reserve in early 2022, which has helped curtail the record wave of new distribution center development that was underway. Throughout the summer of 2023, industrial tenant demand softened and the pullback in groundbreakings grew more extreme.”
The slowdown in construction starts is occurring as completions are rising. About 11.7 million square feet has been completed so far in 2023. This figure is forecast to rise to nearly 17 million square feet by year’s end.
The completion of these newer industrial properties has played a part in the rise in industrial availability, as supply outpaced demand, with leasing activity underwhelming over the past 12 months. The availability rate in New York stands at 8.2%, a notable increase from the 5.7% measured at the start of 2022. The relative slowdown in leasing demand, the completion of more than 18 million square feet of new industrial space since 2022, and the negative 2.8 million square feet of annual negative absorption — or change in occupancy over a given period of time — driven by home goods retailers vacating distribution centers have been the main causes behind the rise in availability.
About 19.1 million square feet of industrial space is still under construction, which is a figure not far from the high of 22.6 million square feet during last year’s third quarter. This bevy of future supply is the driving force behind the continued vacancy increase forecast over the next 12 months. However, if the rate of new construction starts were to continue moderating, vacancy levels may begin tightening again by 2025 once the bulk of new buildings now under construction have been completed.
The US state promised the first retail licenses to previously convicted marijuana sellers. In most cases, it didn’t happen.
Only about two dozen marijuana dispensaries formerly convicted by New York authorities have opened their doors since legal recreational cannabis sales were launched in the state in December last year.
Officials promised many of the first retail licences to sellers with past drug convictions, hoping to give them a chance to succeed before competitors crowded in.
However, legal challenges over the state’s permitting process have left more than 400 provisional licensees in limbo. Marijuana farmers are also staggering because there are too few stores to sell their harvest.
Amid these troubles, New York regulators are now expanding the market. They recently opened up a 60-day general application window to grow, process, distribute or sell marijuana, expecting to issue more than 1,000 new licenses.
The move should boost the number of legal dispensaries in a market now dominated by illegal sellers who simply opened retail stores without permission.
New rules also will allow companies licensed to grow and sell medical marijuana in the state to get into the recreational market.
But the prospect of competing with medical providers worries some farmers and retailers who fear being squashed by deeper-pocketed companies.
“My concern is that they have all the money to bleed us out,” said Coss Marte, who is opening a dispensary in Manhattan next week, after it was pushed back by a lawsuit against New York regulators.
“They’re vertically integrated. So, they could grow their own product at the cheapest price and basically outbid all the farmers, all our products and all our pricing,” he added.
CONBUD, Marte’s shop, was among those temporarily blocked by a judge from opening after a group sued on behalf of disabled veterans, saying they were wrongly excluded from applying for a licence. So Marte, who has a past drug arrest, was left paying rent on a store he could not open.
A judge recently ruled that CONBUD and several other shops could open. But they didn’t all get the same luck.
Balancing equity and competition
Like many other provisional licence holders, after months of delays in opening his store, Carson Grant was debating whether to reapply for a licence again in this 60-day general round. “It’s very difficult,” he said.
Reginald Fluellen, senior consultant to the Cannabis Social Equity Coalition, accused the state of a botched rollout.
“They’ve failed miserably in providing the justice-involved individuals the kind of head start in the market that they promised,” Fluellen said.
To guard against monopolies, the medical providers will be limited to three retail outlets. And in a nod to farmers, their shops will initially have to devote half their shelf space to products grown and processed by independent businesses.
Still, critics say regulators should have allowed more time for economically and socially diverse entrepreneurs to succeed before letting in larger competitors.
Office of Cannabis Management executive director Chris Alexander said the new regulations maintain New York’s commitment to social and economic equity, while making the market more competitive.
Alexander acknowledged there was some “frustration” in getting retail stores open, but added that the state has shown that a market supplied by small farmers can work.
“We’ve got some of the top-performing dispensaries in the country right here in New York,” he said.
And there’s still room to grow. Regulators have estimated New York will eventually require at least 2,000 dispensaries to meet demand.
Medical-MJ firms — who were the first in the state authorized to peddle any cannabis — just slammed the Hochul administration for blocking them from selling to all adult consumers.Shutterstock
As New York’s legal-cannabis rollout continues to stumble, it grows ever more obvious that the decision-makers were all far more focused on scoring symbolic points than on silly things like actually making it work.
The companies already OK’d to sell medical marijuana could have led the way to broader pot sales; instead, they got shut out.
Rather than pursuing its legislated mandate to develop licensing, regulations and guidelines for the sale of legal weed products, the state’s Office of Cannabis Management focused on a social-equity agenda by prioritizing applicants who had prior drug convictions.
Medical-MJ firms — who were the first in the state authorized to peddle any cannabis — just slammed the Hochul administration for blocking them from selling to all adult consumers.
“OCM has ignored the collective wisdom of every other state with an adult-use cannabis program — most recently Maryland — to permit existing medical operators to stand up the adult-use market,” the companies wrote in an Aug. 31 letter to Gov. Kathy Hochul.
Of course, the gov’s brain trust at OCM also shut out the veterans that the law also directed them to prioritize for licenses; that’s led to a lawsuit that has all licensing on hold.
Meanwhile, OCM’s slow start in licensing anyone at all has led to just 23 licensed dispensaries open across the whole Empire State.
According to a CNBC report, the Gulf state of Qatar signed an agreement to purchase the Plaza Hotel in New York for about $600 million through the state-owned Katara Holding.
Katara will assume full control of the hotel while Sahara India Pariwar will retain a 75 percent interest.
The purchase was made just a few days after Sahara India Pariwar chairman Subrata Roy and Sahara’s U.S. division were sued by United Capital Real Estate Development, alleging they broke a contract by looking for other purchasers for the Plaza Hotel, according to Arabian Business.
In a case submitted on June 22 to a state court in New York, United also claimed that Roy and Sahara U.S. had deceitfully persuaded United to sign contracts, produce financial documentation, and put money in escrow. In addition to interest and legal fees, United is requesting $1 billion in damages for the claims.
Additionally, according to the group’s complaint, United consented to buy Sahara’s 85% ownership of the Dream Downtown hotel in New York. On behalf of his company, Roy signed two contracts for these sales on February 19 and February 27, 2018.
This lawsuit was filed in response to a May 2018 complaint filed by Ashkenazy Acquisition and Kingdom Holding, alleging that their agreement to match an offer had been broken. They accepted a bid of $600 million for a purchase deal that was supposed to close on June 25th, matching the offer made by a company led by Shahal Khan. The president of Sahara U.S., Sandeep Wadhwa, planned to respond in court, stating that he did not agree with Ashkenazy and Kingdom Holding’s assertions. The group hasn’t yet submitted that response, though.
The Plaza Hotel has had multiple owners in the past, including the president of the United States, Donald Trump. When he declared bankruptcy more than 20 years ago, Trump sold the hotel. During its tenure, the Plaza’s majority was turned into condominiums by the Israel-based Elad Group. The property is now managed by AccorHotels under the Fairmont Hotels & Resorts brand.
According to a report from Rent Cafe, New York City has retained its title as No. 1 in apartment construction thus far in 2023. The report estimates that at least 33,000 new rental units are set to be opened this year.
Of these units expected to be completed before the end of the year, most of them are either in Brooklyn, Manhattan or Queens. Brooklyn has the most at 9,825, followed by Queens (4,430) and Manhattan (3,770). The Bronx and Staten Island were not included in the metro data set for New York City.
Rent Cafe credits the large amount of construction in New York City being an effort to cut down on housing shortage concerns. As the only northeastern location in the top 20 metros for apartment construction in 2023, there is a high demand for housing in New York City.
From 2020-2022, 66,070 new apartments were opened in New York City, according to data collected by Rent Cafe. This large production was meant as a means to bring housing to more residents new and old. This also reflects high demand even during and following the COVID-19 pandemic. The only metro area to see more units built during that span was Dallas, TX, at 76,660.
RentCafe.com is a nationwide apartment search website that enables renters to easily find apartments and houses for rent across the country.
In order to compile this report, Rent Cafe’s research team analyzed new apartment construction data across 296 U.S. metropolitan statistical areas. The study is exclusively based on apartment data related to buildings containing at least 50 units. Metros with less than 300 units or less than two properties/buildings were excluded from the study.
Yardi Matrix, a business development and asset management tool for brokers, sponsors, banks and equity sources underwriting investments in the multifamily, office, industrial and self-storage sectors, provided apartment data for Rent Cafe. Apartment projections at the metro and city level for 2023 were calculated based on a Yardi Matrix proprietary algorithm, which includes confirmed and likely completions for 2023 based on the issuance of a certificate of occupancy. Once the certificate of occupancy is issued, the status of the property can be considered “completed”.
The U.S. Census Bureau provided data on estimated population by metro area.
For Maefield Development’s 20 Times Square, a $900 million CMBS debt has been moved to a specific servicer.
According to Commercial Observer, the loan went into special servicing on November 3 after defaulting as a result of a $26.8M lien filed against the property.
The 42-story building, commonly known as 701 Seventh Avenue, has four deals that make up the loan’s remaining balance. The development of a hotel at the mixed-use property and numerous foreclosures are apparently the causes of the liens.
A 452-key Marriott International hotel called 20 Times Square briefly opened in August 2019; its shutdown a year later was blamed to the pandemic.
According to The Real Deal, the loan was initially provided to Maefield by the French bank Natixis in 2018 with a May 2023 maturity date. According to Commercial Observer, the property’s 99-year ground lease, revenue from the hotel, the four floors of retail space, and electronic billboards in Times Square all acted as collateral.
The National Football League had a 43K SF experiential store in the area that shuttered in 2018, not long after it had opened, and it was intended to be the property’s retail anchor. According to Commercial Observer, the NFL’s rent at the time of the underwriting would have been $8.25M annually.
Maefield’s lease on its own building was pledged as collateral when Natixis financed the deal for Maefield and Fortress Investment Group to buy out its investors and acquire full ownership of the property in 2018. However, Natixis and a group of foreign investors foreclosed on the property when Maefield and Fortress missed payments on their leasehold debt. The lender selected SL Green to oversee the 350K SF building at auction this year with plans to reopen the hotel wing of the structure.
According to information from the Korea Herald, a group of lenders, including institutional Korean investors and Korean banks KB Kookmin, Hana, and NH Nonghyup, are owing roughly $150M in mezzanine debt on the property.
Numerous marijuana dispensaries might not learn whether they can start operations in New York for at least another two weeks.
In the courtroom, four veterans contended that state legislation had not been followed when evaluating their applications for cannabis licenses. One of the categories given higher consideration by state authorities when deciding whether to provide a cannabis license is veterans. The state Office of Cannabis Management, or OCM, prioritizes people with prior marijuana convictions in New York over veterans, though. All of these soldiers have perfect records.
The state organization in charge of issuing licenses is OCM. The state lawmakers simply authorized guidelines for conditional licenses, the assistant attorney general said in court on behalf of OCM, and left it up to OCM to decide how licenses are actually awarded. The judge said the two sides must cooperate to ensure that no one is harmed by the license application procedure but refrained from rendering a decision.
Spectrum News reported that Hal McCabe, the Cannabis Association of New York’s interim executive director, released a statement in which he expressed disappointment with the court’s decision today and stated that “this injunction continues to threaten tens of thousands of jobs, thousands of businesses, and the entire industry as a whole.”
He stated, referring to corporate cannabis companies, “It really is them and their interests against the entire New York State licensed marijuana cannabis market.” That’s how easy it is. Right now, we are experiencing a true David and Goliath moment right now.”.
An empty office building in Lower Manhattan will be filled with more than 1,300 apartments, making it the largest residential conversion project in the nation, according to its owners. The Daily News and JPMorgan Chase previously occupied the building at 25 Water St., but they left before the pandemic. The 22-story building’s offices have been demolished, courtyards have been created, and 10 further floors have been added under long-standing regulations that facilitate residential conversions in the Financial District.
The owners haven’t submitted the residential layout for final approval to the city’s Department of Buildings, but as long as the new design complies with zoning and building regulations, receiving city clearance is merely a formality in Lower Manhattan office conversions. Both Mayor Eric Adams and Governor Kathy Hochul assert that these conversions can boost the availability of homes in areas like Midtown and Flushing, Queens, but first the state must modify zoning regulations.
The state budget that is presently being debated by politicians in the state takes those modifications as well as a new office conversion tax incentive into account. According to architect Eugene Flotteron, whose business is creating the floor plans for 25 Water St., repurposing an office building is typically quicker than building a new one from the ground up. The units should be open in around two years, according to the developers. However, it is more difficult to convert water coolers and cubicles into beds and kitchens. It’s also not cheap. According to GFP Real Estate CEO Brian Steinwurtzel, the building’s owners GFP Real Estate and Metro Loft intend to scoop out two courtyards from its middle and encircle them with apartments. That will enable the structure to meet the needs for light and air.
