California’s Big Real Estate Problems – Commercial Observer
Among the mysteries of the universe that have long vexed some of our greatest national thinkers are: How can California get out of its housing crisis?
How does a state with a budget surplus in the tens of billions, which house some of the wealthiest companies on planet Earth, and with a population for which housing is a primary concernhesitant so much when it comes to solving the problem?
We’ll leave it to people more educated than us to decide why, but one thing we do know is that housing is a precious commodity in the Golden State and a number of real estate professionals are taking action. Consequently.
The recently created black-owned investment company Langdon Park Capital (LPC) buys not one but two social housing in LA for a total of $36.9 million. The purchase includes a 177-unit apartment complex in Hollywood and a 23-unit apartment building in the southern Los Angeles neighborhood of Baldwin Village.
Similarly, Jonathan Rose Companies invested $41.25 million for a 180-unit seniors’ housing development called Belage Manor at 1660 West Broadway in Anaheim. (Rose and affordable nonprofit developer Jamboree Housing Corporation plan to spend an additional $9 million to renovate the property.)
But, beyond housing, how strong is the Los Angeles real estate market?
Not very, according to a recent report. Fears about inflation and rising interest rates have prompted some office tenants to review their real estate portfolio and give up.
A report from Savills revealed that “agreements falling out of contract by the end of the quarter (primarily from the technology sector) and other active requirements are now pending.”
On Friday, CO learned that one of the Los Angeles giants, Netflix, is putting tens of thousands of square feet of office space in sublet, after a catastrophic first half. (Its stock has fallen 68% this year and it has already laid off 450 people.)
On the other hand, we have also learned that the First Republic Bank has signed a massive renovation and expansion of 156,163 square feet in Century City. So there is this.
But, yes, First Republic leases aside, LA faces many of the same real estate issues as other major metros. Renting in Manhattan, for example, is still relevant 30.5% below pre-pandemic levels, according to a recent report by Lee & Associates. And, according to second-quarter reports from Newmark and CBRE, the number of vacancies is unprecedented.
“You’re not going to see higher uptime since we’re tracking the stats, which go back to the mid-1990s,” Jonathan Mazur, Newmark’s senior managing director, told the CO. “While the Great Financial Crisis was a Class A Midtown Recession involving the financial sector, this downturn encompasses everyone in all markets, so it’s a bit more pronounced.
The GA is watching
It was not a good week for friends and business associates of former President Donald Trump.
We’re not talking about the suggestion that Trump fired the IRS over his director and deputy director of the FBI (although the suggestion was the main story in The New York Times Wednesday), or the fact that Rudy Giuliani, John Eastman and Lindsay Graham (along with four others) received subpoenas in connection with a criminal investigation into election interference in Georgia (although they were). No, we’re talking about Cushman & Wakefield.
New York State Supreme Court Justice Arthur Engoron detains real estate company in defiance of the court saying he ‘moved to rescind’ subpoenas from the office of New York Attorney General Letitia James, which sought to reveal whether the firm helped the former POTUS inflate the prices of several properties in his portfolio .
And that wasn’t the only win the New York AG had this week; his office claimed that the owner of Brooklyn SGW Properties failed to comply with 2019 changes to rental laws that require itemized deductions as to why a security deposit is withheld. Up to 129 tenants will receive a total of $296,272 from SGW.
After years of state-to-state negotiations, Governors. New York’s Kathy Hochul and New Jersey’s Phil Murphy have pledged $2.7 billion to complete the first phase state funding to build the new $14 billion Gateway Rail Artery under the Hudson River, splitting the costs 50-50.
“We’re setting the framework to get this project across the finish line and delivering on our promise to modernize the state’s transportation infrastructure and create a transit system fit for New Yorkers,” Hochul said. in a press release.
And a lease is always good news, right?
Times Square, for example, is welcoming a friendly new retailer, namely, IT’S SUGARthe candy store taking up 20,335 square feet in the former Modell’s.
The Feil organization signed a lease with British clothing designer Paul Smith for 12,617 square feet on the fifth floor of 257 Park Avenue. Additionally, developer Beachwold Residential has also leased 12,637 square feet on the 13th floor.
Homeowner MD Squared Property Group signed a five-year lease at 7 Penn Plaza, taking over from Cast & Crew Entertainment Services.
And AXA, the French insurance company, says goodbye to 711 Third Avenue and move to 12,303 square feet at RXR’s 340 Madison Avenue.
lose a friend
Finally, we learned some sad news this week.
Last weekend, Will Friend, the CEO of Bisnow, was hit by lightning and killed while sailing off North Carolina.
The 33-year-old took over the events and press company in 2015 when he was just 27.
“What made Will special was his innate ability to inspire and motivate people – to lift people higher than they thought possible,” said the COO and CFO of Bisnow, Gregg Mayer, in a statement. “It was the culture he fostered in Bisnow and ultimately it will be his lasting legacy.”
See you next week.