Hello rising retail rents, goodbye Papaya King – Commercial Observer
Just when retail thought it was out, they put it back in place.
Namely, after years of retraction, The New York average retail asking rent has increased at $57.95 per square foot in March, according to a recent retail report from Marcus & Millichap. That’s a 2.9% year-over-year increase, and average asking rents are expected to reach 2019 figures ($58.45 per square foot) by the end of 2022.
However, the words “uncomfortably high” with respect to the risk of recession is just the kind of slug in the gut that retail doesn’t need right now.
“I think there are a lot of tenants out there who are holding their breath and just trying to figure out where the world will be,” said CBRE’s Lon Rubackin. told the CO before adding: “I have not yet seen this affect retailers seeking space or committing to space at this stage [but] logic tells us that it might happen.
Of course, a lease is always an unalloyed good, and there have been commercial leases this week. The chefs of the Llama Inn, one of the city’s trendy restaurants, signed a 6,000 square foot lease for a new restaurant at 66 Hudson Boulevard by Tishman Speyer, aka The Spiral. And the popular Italian restaurant Mangia signed a lease for a move at 57 West 57th Street in Williams Equities.
But there was also less than good news. Like, say, a trial between one of New York’s biggest retailers, the Zabar family, and Friedland Properties, which is trying to get the Zabars to sell their stake at 2231 Broadway.
Perhaps the most disheartening retail news is that Papaya King, the beloved purveyor of frankfurters and tropical drinks that used to be on the corner of Third Avenue and 86th Street is since 1932 (?!?) is defined be demolished thanks to the folks at Extell. RIP, papaya king. We will prepare an orange and papaya drink for you.
office, office, office
Maybe we think about it because we’ve been watch too much “Severance” but retail is not the only asset experiencing a tight moment.
This week, we learned that Yelp has decided to get rid of superfluous offices in New York, Washington, DC and Chicago, and allow employees to work fully remote.
“Overall, about 1% of our workforce chooses to come into the office every day,” Yelp CEO Jeremy Stoppelman wrote in a statement. blog post. “Combined, the three offices we are closing have seen an average weekly utilization of less than 2% of available workspaces.”
This is the kind of ad that can entice homeowners to seek out the Bushmills. (And beyond just landlords, this office backlash can’t be good for city and state coffers; we learned this week that New York City has the most highly taxed office real estate in the country.)
Luckily for owners, not everyone follows Stoppelman’s lead.
In New York, CannonDesign, a global architecture, engineering and design firm, took the whole second floor by Somerset Partners and Meadow Partners’ 300 East 42nd Street.
Three firms – law firm Dewey Pegno & Kramarsky, recruitment firm Sheffield Haworth and real estate and life sciences investor Innovatus Capital Partners – renewed their leases at the William Kaufman Organization’s 777 Third Avenue (or, in Dewey Pegno’s case, moved into the building).
Another law firm – Spears & Imes – took up space in another William Kaufman building a stone’s throw away, at 767 Third Avenue.
And even flexible space is still doing business. Industrious takes a huge 44,000 square foot space released by another flexible space provider (WeWork) in the Cunard building. (Speaking of WeWork, did we mention that in addition to “Severance,” we’ve been watch “WeCrashed” too?)
We will always have sales
Aside from those dreary spots in the market, it’s not like investors are sitting on their stacks of cash. At least some are not.
MetLife Investment Management (MIM) and PGGM acquired the 15-acre office campus called Intersect in Irvine, Calif., for $235 million from Hines, making it the biggest office deal in Orange County this year.
Tishman Speyer also unloaded a leading office in Southern California property at 555 Aviation Boulevard in El Segundo for $205.5 million to Rialto Capital Management.
To the east, DH Property Holdings and Goldman Sachs Asset Management just claimed $330 million for a brand new logistics facility (fully leased to Amazon) at 640 Columbia Street in Red Hook, Brooklyn, from CBRE Investment Management, the investment arm of CBRE.
We honestly can’t get enough of this logistics and life sciences offers!
The other asset that doesn’t worry us too much is multifamily, although the affordable housing market is harder to master than many other asset classes. L+M’s Lisa Gomez talked to CO about it in our cover story this week.
Many people who care about ESG (environmental, social and corporate governance) were no doubt deflated by the US Supreme Court’s opinion on Thursday which essentially removed the EPA’s ability to regulate carbon dioxide emission. (With last month’s decisions on Abortion and gun rightsthis conservative court is really strapped for cash.)
But we doubt that means ESG will lose its importance. On the contrary, it is a subject on which real estate will have to learn more in the years to come.
The use of Proptech in the fight against climate change was a topic that was raised during a recent trade observer forum.
“You can’t manage what you don’t measure,” said panelist Danielle Donnelly, manager of sustainability programs at The Community Preservation Corporation, a nonprofit development financier.
Indeed, this is one of the trickiest questions facing real estate: how do buildings zero carbon?
This was the lead article of our new ESG newsletter. (Register here.) ESG is likely to further shape the world of real estate in the future. For example, last month saw the official launch of the Real Estate Pride Council for LGBTQ people in the commercial real estate community.
Happy July 14!