“Success is not final, failure is not fatal; it's the courage to continue that counts.”

Strange start to 2023.?

Still anticipation in the air as businesses juggle with office plans and remote work imbalance.?Is it sustainable??The lack of decision making that is.?

Since everyone loves data, I’m purely focusing on market activity this month.?It’s the only constant in my daily conversations with clients, colleagues and friends, and for good reason.?We still don’t know.

If you’re looking for signs of life, you’ll find them in NY – unless of course you’re one of the businesses caught up in the SVB mess; https://www.ft.com/content/b556badb-8e98-42fa-b88e-6e7e0ca758b8

You see, rarely has a real estate project run seamlessly from A to Z as initially intended, but now in 2023, all rules have been re-written, decisions change mid-stride frequently and projects are becoming a game of stamina.

New deals.

New deal activity has largely been limited to core professional service firms with healthy balance sheets, at least those making headlines: https://www.bloomberg.com/news/articles/2023-02-06/manhattan-s-renovated-550-madison-adds-junto-capital-as-tenant#xj4y7vzkg).?New development projects have never garnered so much attention and most businesses with an appetite for that sector are quickly running out of options. There are some signs of activity though for “bargain hunters” as is the case in any softened market.

• Northern Trust leased the entire 2nd floor at the recently repositioned 390 Park Ave – 20 years, deep six figure rents with $175 psf in cash allowance.
• Greenspoon Marder snagged an absolute steal at 1345 Ave of Am from CBS which became the last date in town after sitting on the market for 2 years.?Sub $50 deal in a building pushing $90/$100 rents.
• The Consulate of Jamaica landed at the recently re-worked 300 East 42nd St. for 45,000 sf.?Committing for 20 years with the deal starting at $60 psf.
• Vibrant Emotional Health, apparently big believers in a continued market for mental health services, locked up 60,000 sf at 80 Pine for 15 years.?$47 starting rent.?And people say Downtown is dead.

Rumor Mill

• Blackstone, long a fan of the Eastside, is apparently taking a closer look at 345 Park Ave and what will be the new 175 Park Ave (where the Hyatt currently sits).
• Spotify is dumping 3-4 floors on the market at 4 World Trade – the space was spectacularly built, and someone is going to get a shiny new home at a discount.
• Highbridge Capital is apparently looking at 550 Madison which has had a nice leasing run of late.
• The famed GM Building is putting the finishing touches on an amenity center – late to the game? Perhaps, but office buildings with all the sauce are the barriers to entry.?Views don’t cut it alone. You need everything to command big rents nowadays.

• Epoch Times taking a ride through the Peloton Sublease for 75,000 sf – what a RE disaster that was.
• No longer a rumor, Twitter listed approx. 180,000 sf at 245 and 249 West 17th Street.?Not so long ago every tenant in the city wanted to be in that part of town.?My guess, that will be a lengthy disposition process.
• Sequoia who made a splash last year with a major lease for their first NYC office (https://commercialobserver.com/2022/07/sequoia-capital-zero-irving/) is apparently still hungry for more and looking for 100,000 sf – Hudson Yards seems to be calling.

New Development Pipeline

• Fifth Avenue - https://tinyurl.com/520-Fifth
• Downtown - https://commercialobserver.com/2023/03/45-broad-street-gemdale-madison-equities/
• Park Ave - https://newyorkyimby.com/2023/03/405-park-avenue-completes-demolition-in-midtown-east-manhattan.html

How does the rest of the year play out from here?

I think the financial sector continues its domination in the leasing world while certain landlords scramble to satisfy debt service. Creative deal structuring based on an owners position in the market will be the biggest area for leverage for those solidifying office roots for the future.

I opened with uncertainty around decision making. As a company, if you can get past the skepticism cloud, there are countless opportunities to meet any business plan. Leadership brave enough to define and commit to action, regardless of perceived public and employee pushback will be better positioned for the future. Moving the goalposts by 12/24/36 months may not prove anything after all, other than market leverage shifting its balance once again.

OP

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