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Two-year old Hudson Yards skyscraper hits 81% leased
Tishman Speyer has secured five new lease agreements at its Hudson Yards tower, totaling 129,500 square feet. HSBC has signed a 35,400 square-foot expansion at 66 Hudson Boulevard, known as The Spiral, which will expand its US headquarters to over 300,000 square feet. Two investment management companies have also signed full-floor deals at the 2.8 million square-foot tower. XR Extreme Reach will take 13,400 square feet on the 21st floor, while asset manager Fifth Wall will take 6,700 feet on the 53rd floor. The property owner declined to comment on the lease terms, but asking rents at The Spiral range from $125 to $225 per square foot. The building features landscaped terraces and an amenity center and lounge on the top floor.
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Madison Capital, a developer of the six-story SoHo office and retail building, 606 Broadway, has been sold to Avison Young Tri-State Investment Sales. The property, delivered in 2019 by Madison and Vornado Realty Trust, was selected by the New York City Economic Development Corp. in 2012 but was not completed until 2016. Madison and Vornado spent $25.8M to buy the site from the EDC and completed construction in 2019. The developer also spent $13M for an alternative parking facility for the Metropolitan Transportation Authority. The retail portion of the project has been leased, but the developers have not yet filled its office space. The sellers are represented by an Avison Young team, highlighting the growing trend of retailers and corporations buying retail and office properties rather than leasing them.
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Sovereign Partners have bought 3 office buildings in 1.5 years
Cyrus and Darius Sakhai's Sovereign Partners is set to buy Nuveen's newly renovated office tower at 780 Third Avenue for $178 million, making it their third office building purchase in the past year and a half, totaling nearly $400 million. The 510,000 rentable-square-foot building, which is 56% leased, was recently renovated by Nuveen, the investment management arm of TIAA, for $40 million. The deal was brokered by Eastdil Secured’s Will Silverman and Gary Phillips. TIAA bought the 50-story tower in 1999 for a reported price of $162 million, a near record price for Third Avenue at the time. However, the office market and interest rates have pushed down office values across the city compared to their high-water marks. The Sakhai brothers have been ambitious office investors, having previously purchased the office portion of Clarion Partners’ 20-story office building and the Tower56 office building in the Plaza District.
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Average deals are shrinking from pre-pandemic: JPMorgan
Office deals have been decreasing in recent years, with tenants taking 14% less space on average compared to before the pandemic, according to Crain's. JPMorgan Chase determined this figure after interviews with Newmark officials. Most leases signed before 2020 haven't come up for renewal yet, which could lead to some tenants reducing or eliminating their office portfolios. Vacancy rates are elevated by seven percentage points above what they would be due to these headwinds in the office market. Availability rates are shattering records across the nation, with Manhattan's first quarter availability rate of 18 percent. Net absorption declined across the country, with negative 15.5 million square feet in the first quarter. Effective rents in the Big Apple are down by up to 20% for non-trophy office buildings, with concessions at 70% above pre-pandemic levels. SL Green officials have noticed rising demand from tech tenants, with Known demand from tech tenants almost doubled from a year earlier.
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The Durst Organization is no longer considering selling its luxury rental building, Sven, in Long Island City, after securing a $450 million refinancing package from Wells Fargo. The company had been considering a $800 million sale of the property since early this year but is now considering the refinancing as a better option. Durst has been marketing the potential sale of the property and arranging the refinancing package,. The property, which stands 71 stories tall and includes 670 market-rate units and 288 affordable units, is the second-highest building in Queens. The building has 11 available apartments, with rents ranging from $3,300 for a studio to $7,315 for a three-bedroom.
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Real estate companies RFR and Kushner have sold an interest in 81 Prospect St. to Brooklyn-based developer Jack Guttman for $33.8 million. The property, part of their mixed-use campus in the upscale Brooklyn neighborhood, spans 750,000 square feet across four adjacent buildings. The firm recently landed a four-year extension of a $480 million loan on these properties and negotiated a deal with WeWork to remain at 77 Sands St. The building stands nine stories tall and spans 95,000 square feet with estimated asking rents ranging from $58 to $71 per square foot. RFR, led by Aby Rosen, is an owner of the Chrysler Building and the Seagram Building and recently sold its mixed-use property at 980 Madison Ave. to Bloomberg for $560 million. The firm has faced issues with some of its other properties, such as Fitch downgrading its office building at 90 Fifth Ave. and a lender foreclosing on its property at 522 Fifth Ave. RFR has also sold off several properties in the city recently.
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Decline is latest challenge for troubled office investor Shorenstein
Shorenstein Properties' 1407 Broadway office tower has experienced a significant drop in value, from $510 million in 2019 to $136.1 million this year, with a decline of $334 per square foot. The office tower, located in the Garment District, has been struggling to keep the building full, with a 16% empty rate by the end of 2022. The decline is attributed to a vacancy rate that has since increased or is expected to as leases expire. The Garment District has suffered with outdated zoning for years, leading to high-paying tenants moving to Hudson Yards and the Grand Central area. Despite the office sector's avoidance of a "doomloop" scenario, vacancy rates remain much higher than before Covid. The ground lease on 1407 Broadway expires in 2030, but it's extendable to 2048. The property's value may also be hampered by the upcoming end date, which could trigger a jump in rent for the land.
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