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Related’s 30 Hudson Yards grabs two largest new leases
The Manhattan leasing market experienced a significant recovery last month, with tenants signing deals for 3.6 million square feet of office space, a 24% increase from last January, according to a new Colliers report. Leasing volume jumped 24 percent from December, thanks to renewals, expansions, and two large new leases at Related Companies’ 30 Hudson Yards. Investment firm Stonepeak inked a 149,000-square-foot lease, while Visa took a 146,000-square-foot lease at Steve Ross’ West Side supertall. Strong leasing volume and office-to-residential conversions have netted seven consecutive months of positive absorption.
In Midtown, over 850,000 square feet of space disappeared due to planned conversions at 5 Times Square and 767 Third Avenue. Downtown saw the lowest ever recorded leasing volume last year, but conversions are taking up millions of square feet. Availability tightened last month in Midtown, Midtown South, and Downtown. The largest lease was Mayer Brown's 331,000-square food renewal and expansion at Rockefeller Group’s 1221 Sixth Avenue. KnitWell Group signed a 20-year lease for 246,000 square feet at Boston Properties’ 7 Times Square, expanding by 55,000 square feet. The average asking rent held steady at around $73 per square foot, but leasing velocity was 36% above the ten-year monthly average and sublet supply tightened for the fourth month in a row, hinting at continued recovery.
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Corporate law firm Mayer Brown has signed a renewal and expansion at Rockefeller Group's 1221 Sixth Ave. office building in Midtown Manhattan, expanding its space by 96K SF to reach a total of 331K SF. Other tenants include global law firm Dentons and Del Frisco's Double Eagle Steakhouse. BXP has signed GoldenTree Asset Management to a 60K SF lease at the GM Building at 767 Fifth Ave. for 15 years, giving GoldenTree space across the 43rd and 44th floors of the 2M SF building beginning in 2026. New York Cancer & Blood Specialists has signed for 35K SF at Youngwoo & Associates’ Radio Tower. A&E Television Network renewed its 152K SF lease at Republic Investment Co.’s 227 E. 45th St., with space in the next-door building for its headquarters and production studios. Law firm Axinn, Veltrop & Harkrider LLP has relocated to 28K SF in Tishman Speyer’s 45 Rockefeller Plaza.
SharkNinja is opening a 14K SF office at 41 Madison Ave., Rudin’s 42-story, 560K SF office tower overlooking Madison Square Park in the Flatiron District. Interactive gaming company Activate Games plans to open a 15K SF retail flagship at Resolution Real Estate Partners’ 24 Union Square E. The property was originally the location of the S. Klein department store from 1912 until the early 1970s. Himmel + Meringoff has sold The Noodle Factory in Long Island City for $20.5M, while Hebrew Union College has sold 1 W. 4th St. to New York University for $75.5M. The Elo Organization bought 21 W. 46th St. for $43M, acquiring the Class-B office building in Manhattan’s Diamond District. Bangladeshi investor Asef Bari shelled out $30M to the Bruno Family Trust to acquire a four-story Jackson Heights office building at 74-09 37th Ave.
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Citadel takes 504k square feet as it waits for new HQ
In January, the New York City office leasing scene saw a strong start with several major tenants signing titanic leases and renewals. The top ten largest leases of the month include Citadel, KnitWell Group, FDIC, General Services Administration, and IBM. Citadel signed a massive new lease across 20 floors in Brookfield Properties' Plaza District building, while KnitWell Group expanded in its Times Square building, owning a suite of clothing brands including Ann Taylor. A five-member CBRE team represented the tenant, while BXP's landlord is BXP. The FDIC signed a new 10-year lease in the building, where it plans to relocate from current digs at the Empire State Building.
A four-member JLL team represented the landlord, Edward J Minskoff Equities, alongside in-house representation from Jeffrey Sussman and Matt Pynn. The General Services Administration inked a new lease in Jamaica for space to be used as an operations facility for the Customs and Border Protection agency. IBM also signed a new lease in Flatiron, with 93K sf. The office leasing scene in New York City is expected to continue growing, possibly just ahead of DOGE's downsizing.
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A mortgage for 170 Broadway, owned by a subsidiary of Morgan Stanley and a partner, Crown Atlantic Retail I LLC, has been transferred to special servicing due to Gap's potential failure to renew its lease. The landlord has fallen behind on loan payments, and the $64 million mortgage due in April faces imminent monetary default. The 16,000 square feet of retail space is owned by a subsidiary of Morgan Stanley and a partner, Crown Atlantic Retail I LLC. Leasing activity in the Financial District increased by 26% in the fourth quarter, to 4.4 million square feet.
Major chains such as Wegmans and Whole Foods took more space. Gap took all of 170 Broadway's retail space in 2015 at an annual base rent of $263 per square foot, or about $5 million a year, with annual escalations of 3% until the lease expires in 2030. However, Gap shut all stores on March 18, 2020, after the government ordered non-essential services to close. The landlord reminded Gap that it was still on the hook for rent. Gap filed a lawsuit and sought to terminate its lease, but a New York state judge ruled in Gap's favor. KBRA noted that Gap is "unlikely" to renew its lease when it expires in five years, and the landlord may not be able to refinance the mortgage when it comes due in three months.
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The United Nations Development Corp. is redeveloping 1 and 2 United Nations Plaza in Manhattan, a $500 million project aimed at consolidating the organization's office footprint in the city. The project, which will start in the second quarter, will upgrade midtown Manhattan buildings designed in the 1970s and 1980s. The two towers, owned by New York City, are currently used as office space for the U.N. community, with a privately owned hotel on the top floors. The renovations will consolidate the organization's office spaces across the city into the two buildings, with the group agreeing to long-term leases of the space. The project covers about 900,000 square feet and will upgrade the towers' lobbies, restrooms, common areas, and add an indoor bicycle parking area. The city will transfer ownership of 3 U.N. Plaza to UNICEF in 2026. The project aims to create good-paying jobs, drive economic growth, and reinforce the United Nations' position as the global capital of commerce and diplomacy.
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Demand for office towers on Park Avenue is increasing, especially with the refinancing of 299 Park Ave. The $500 million mortgage has been packaged into a single-property security, and the market's enthusiasm is the highest seen in a long time for any office building. A $300 million AAA-rated slice of the loan was priced at just 95 basis points above the benchmark interest rate, a significant tightening from the 130-point spread in similar refinancings for Manhattan office towers. This transaction highlights the gap between the owners of Park Avenue office towers over those almost anywhere else.
Park Avenue's 12% vacancy rate is half the average rate across Manhattan, and what the street lacks in restaurants or retail it makes up with banks and asset managers. The building's pedigree is impeccable, with Fisher Brothers developing it in 1966 and the family's 7 million square-foot office portfolio including Park Avenue Plaza. The building has regained its pricing power, leasing 65,000 square feet to three new tenants at rents 2.2% higher than before last year. The building's strength is paying off in tangible ways, with Fisher and its partner, the Alaska Permanent Fund, sharing a $95 million dividend.
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The proposed Midtown skyscraper, developed by a partnership including billionaire Ken Griffin, is set to begin public review next month. The 62-story all-electric skyscraper will replace aging office stock with new, competitive spaces. The project will demolish three existing buildings, including a 30-story office tower, a 23-story office building, and a 5-story office building, to make way for the 62-story all-electric skyscraper. Griffin's firms, Citadel and Citadel Securities, will be the tower's anchor tenants, occupying at least 850,000 square feet.
The Greater East Midtown rezoning, approved by the City Council in 2017, encouraged the development of modern office buildings. The project's origins can be attributed to the Greater East Midtown rezoning, which was approved in 2017 to encourage modern office building development. The project will also include more than 16,000 square feet of ground-floor retail and a 12,500-square-foot public concourse designed to enhance the Park Avenue corridor. Construction is expected to begin in spring 2026 after a seven-month review process, requiring public hearings and analysis from various stakeholders. If approved, construction is expected to be completed by 2032.
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Donald Bren’s company to close deal at 6.25% interest
The Irvine Company is nearing the refinancing of the MetLife Building in Midtown Manhattan with a $1.5 billion loan, which would carry an interest rate of 6.25 percent over 10 years. This is a significant increase from the 3.6 percent interest rate Donald Bren's firm previously faced, and the debt-serving costs will double to approximately $100 million a year. The 58-story, 3 million-square-foot building is 94% occupied and generates $170 million in net operating income. Ownership, which included Tishman Speyer until it was bought out last year, has invested $180 million in the property dating back to the year before the pandemic. The MetLife Building was acquired in 2005 for $1.7 billion and is the only New York holding for Irvine. The elevated interest rate is indicative of the mortgage environment's drift in recent years, as interest rates at other Manhattan properties have also increased. Irvine's investment in the building has been significant, with updates to the lobby and connections with Grand Central Terminal.
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Funding uncertainty sends shockwaves through affordable housing community
New York City officials delayed payments to thousands of landlords whose tenants use Section 8 housing vouchers due to confusion from the Trump administration's proposed federal funding freeze. The program, administered by the New York City Housing Authority, is backed by $2 billion annually from the federal Department of Housing and Urban Development. Private landlords receive their funds at the beginning of the month but awoke Monday to a dearth of expected deposits. A NYCHA spokesperson said the delays were due to confusion from the Trump administration's proposal for federal agencies to pause all payments.
The NYCHA received the funds as of Monday morning and started processing payments, which were expected to hit bank accounts within one business day. The proposed freeze on federal funding wouldn't have applied to Section 8 vouchers in the first place, as payments for individuals, such as rental assistance, weren't covered in the order. The impact of the delay could extend beyond a temporary blip in the system, as some landlords would be willing to rent to tenants without vouchers, even if they recoup less, because of the need to have the money promptly to pay for mortgages and improve bottom lines.
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HUC will continue using property until new location is ready
New York University has acquired a property at 1 West 4th Street in NoHo for $75.5 million, with the seller being Hebrew Union College, which purchased the property from NYU in 1978. HUC plans to relocate to an undisclosed Manhattan location, which is being renovated, by 2027. The college will continue to use the building on West 4th Street until then. The move is driven by the school's shifting needs, as its academic and institutional needs have changed since its current location. Once NYU takes possession of the property, it plans to use the building for classrooms and possibly a center for education programming. NYU has also purchased other notable deals, such as a 12-story student housing development and a 120,000-square-foot office building. In October 2022, The Real Deal found that NYU has the largest real estate footprint of any college or university in the city, with over 14 million square feet across more than 100 buildings.
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Gersh Academy will occupy three floors of Class B office building
Gersh Academy, a school for autistic children and young adults, has secured a 10-year lease in Downtown Brooklyn. The school, which aims to accommodate students aged 5 to 21 on the autism spectrum, will occupy three floors of the 310,000-square-foot Class B building. The lease deal includes a direct lease of 25,000 square feet and a sublease from Brooklyn Labs. Gersh Academy, founded in 1999, has locations in Queens, Long Island, Washington, and Puerto Rico. The Brooklyn location will partially open later this month. The Brooklyn office market is dominated by small and mid-sized tenants from the healthcare, education, nonprofit, and government sectors. However, the borough has an oversupply of new Class A construction built over the last two decades, with about 18 percent of Brooklyn's 47 million square feet of office space built after 2020.
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Korean mezz lender moves to foreclose on overlevered office building
Aby Rosen, a prominent investor, is facing foreclosure on his ownership stake in the Grand Central office building at 285 Madison Avenue. DAOL Asset Management, the Korean investment firm that provided Rosen's RFR Holding with mezzanine debt on the property, has scheduled a foreclosure auction for April 15. The lender is also shopping the debt for sale, with an eye on a price north of $300 million. RFR is also facing foreclosure on the property from the CMBS bondholders. The property, which is 96 percent leased, was bought for $189 million in 2012 but has been crippled by debt.
In 2017, RFR took out a $235 million CMBS loan against the property and $205 million in mezzanine debt. Rosen and his partner Michael Fuchs used the funds to pay off an existing $300 million loan and cashed out about $127 million from the remaining proceeds. When the CMBS loan matured in November 2022, RFR requested an extension, but when it matured in May 2024, they were unable to pay off the loan. DAOL Asset Management sued Rosen and Fuchs over their personal guarantees on the debt in May, and a judge ordered the investors to pay $18 million.
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Luxury gym has been on expansion tear since $1.8B investment
Equinox, a luxury gym chain, occupies the most retail space in Manhattan, with 31 of its luxury fitness clubs open and negotiating a lease for its 33rd. The company, which opened its first location in 1991, has grown its footprint to 1.3 million square feet, surpassing Macy's 1.25 million square feet. Equinox's growth strategy has been strategic, shifting from opening flagship locations to filling in spaces between locations. The company has seen competition from Life Time Fitness, which opened its first New York location in 2016 and now has seven clubs in Manhattan. Equinox is also focusing on nostalgic, mid-century inspired "sporting clubs" and is looking to expand into second-tier cities like Charlotte, Denver, Seattle, and Atlanta. Equinox's growth has been boosted by a $1.8 billion investment last year, and the company is looking to expand its reach by opening new clubs. Equinox's growth is driven by its predictable and strong financial performance, and the company's ability to double its size.
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