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Rockefeller Center’s $3.5B Refinancing: A Litmus Test for Prime Office Real Estate

By Columbus International,

In a bold move that’s sending ripples through the commercial real estate market, New York’s iconic Rockefeller Center is on the cusp of a mammoth $3.5 billion refinancing deal. This high-stakes financial maneuver is poised to become a pivotal indicator of investor confidence in premium urban office spaces.

The Deal at a Glance

  • Amount: $3.5 billion
  • Property: Rockefeller Center, New York City
  • Owner: Tishman Speyer
  • Lead Banks: Bank of America, Wells Fargo
  • Structure: Single-asset, single-borrower commercial mortgage-backed security

Why It Matters

The success or failure of this refinancing effort could set the tone for the entire midtown Manhattan office market. With the commercial real estate sector still reeling from the aftershocks of the COVID-19 pandemic, this deal is being closely watched by industry giants like Brookfield, who are waiting in the wings with their own refinancing plans for trophy assets.

Rockefeller Center: A Cut Above

What sets Rockefeller Center apart in a challenging market?

  1. High Occupancy: The complex boasts a remarkable 93% occupancy rate.
  2. Prime Location: Situated in the heart of midtown Manhattan.
  3. Diverse Revenue Streams: From office rents to tourism attractions.
  4. Blue-Chip Tenants: Including Lazard, Deloitte, and NBC Studios.

“If you want to survive as an office in this market, you need to have a differentiated product and that is what they’ve done,” notes a real estate executive familiar with the refinancing.

The Bigger Picture

While Rockefeller Center may be a bright spot, the broader office market continues to face headwinds:

  • Manhattan’s office availability rate stands at nearly 20%, up from 12% pre-pandemic.
  • Many property owners are underwater on their mortgages, with some resorting to abandoning properties.
  • A growing trend of expensive renovations aimed at attracting tenants seeking modern amenities.

Looking Ahead

A successful deal at Rockefeller Center could potentially unlock a series of major refinancings for other trophy properties, including:

  • The MetLife building
  • Brookfield’s Manhattan West development
  • Tishman’s Hudson Yards buildings

However, industry experts caution that Rockefeller Center’s success may not signal an all-clear for the entire office market. As one real estate executive puts it, “It is a ray of hope. For the good stuff you have record rents and not a lot of availability. On the bad stuff, it is either just land value or offices that need to be converted to residential space.”

In the high-stakes world of New York real estate, all eyes are now on Rockefeller Center as it aims to prove that prime office properties can still command top dollar in a post-pandemic landscape.

Main source: Financial Times
Photo: Concorde Hotel

Manhattan’s Retail Renaissance: Storefronts Surge Despite Economic Headwinds

By Columbus International,

In a striking display of resilience, Manhattan’s retail sector is experiencing a robust revival, according to a recent report from the Real Estate Board of New York (REBNY). The first half of 2024 has seen a surge in storefront activity, particularly in the small to mid-sized market, with the food and beverage industry leading the charge.

This resurgence comes as welcome news to a city still grappling with the aftermath of the pandemic. Despite rents hovering 20% to 30% below pre-COVID levels, demand for retail spaces remains strong, driven by a potent combination of rebounding tourism and the gradual return of office workers.

Keith DeCoster, REBNY’s director of market data and policy, notes, “Surging tourism invigorated Manhattan retail in 2022 and 2023.” This trend shows no signs of slowing, with New York City cementing its position as a top destination for sports tourism, bolstered by events like the 2024 Cricket World Cup.

The retail landscape is evolving, with savvy businesses adapting to new market realities. As prime locations in SoHo and Madison Avenue become scarce, retailers are exploring opportunities in less traditional corridors. The Penn District and Avenue of the Americas are benefiting from increased office activity, while residential neighborhoods like the Upper East and West Sides are seeing an influx of diverse businesses, from apparel stores to comedy clubs.

However, the recovery is not uniform across the borough. Times Square, once the beating heart of New York’s tourist economy, continues to struggle. DeCoster cautions, “Tourism and return to office remain below pre-Covid peaks, and lagging neighborhoods and pockets of vacancy underscore the reality that retail businesses still face significant obstacles.”

The city is not standing idle in the face of these challenges. Initiatives like the City of Yes: Economic Opportunity plan aim to streamline zoning and ordinances, potentially accelerating the filling of vacant storefronts and revitalizing streetscapes.

As Manhattan’s retail sector navigates this complex landscape, one thing is clear: the borough’s legendary resilience and adaptability are once again on full display. With continued innovation and support, New York’s storefronts are poised to write the next chapter in the city’s enduring retail story.

Real Estate Market Rebalancing Offers Buyers Attractive Opportunities

By Columbus International,

The real estate market is going through a transitional phase, moving from a period of strong euphoria to one of greater reflection. According to data from the Revenue Agency and the Tecnocasa Group, there is a decrease in residential property sales and an increase in the average discount applied to selling prices. In the second half of 2023, the average discount in Italy was 8.3%, an increase compared to the previous year.

This gap between the price requested by sellers and the price actually paid by buyers is widening, indicating greater caution in the market. The discounts vary depending on the type of property. Used properties suffer greater reductions (8.5%) compared to renovated (7.5%) and new (4.5%) ones, as they often require renovation work that entails additional costs. The most significant discounts, almost 12%, are recorded for properties purchased for investment purposes, where the buyer’s purchasing power carries more weight.

Economical properties and homes sold out of necessity suffer above-average discounts, respectively 10.2% and 9.6%. The position of the property also influences the discount: ground-floor apartments suffer discounts of 8.5%, while for those on the top floors, the discounts are more contained (7.7%). These data confirm the picture of a slowing real estate market. In fact, the Revenue Agency has recorded a sharp decline in residential property sales in the first quarter of 2024, equal to 7.6% compared to the same period in 2023 and 7.2% compared to the last quarter of 2023, affecting all areas of the country.

Source: Il Sole 24 Ore

Kim Kardashian’s Skims Scores Prime Fifth Avenue Retail Space at Bargain Rates (The Real Deal)

By Columbus International,

In a strategic move that underscores shifting dynamics in New York City’s retail real estate landscape, Kim Kardashian‘s apparel empire, Skims Body, has secured a coveted lease for a sprawling 20,000-square-foot space on Fifth Avenue. This development comes at a fraction of the cost compared to its predecessor, signaling a savvy business maneuver amidst a changing market. According to reports from The Real Deal and Crain’s, Skims Body inked a deal with Oxford Properties and Crown Acquisitions for at least 75 percent below the previous tenant’s lease rates. The stark difference in pricing was highlighted in a recent report by Fitch Ratings, which also noted adjustments in the mortgage structure backing the Skims space and other properties in the vicinity. While specific lease details remain undisclosed, industry experts speculate that Skims Body’s rental rates could be well below the $770 per square foot paid by Versace, the former occupant, as reported by KBRA in 2022.

This suggests that Skims Body is likely paying under $200 per square foot—a substantial reduction reflective of evolving market dynamics. Kim Kardashian’s multifaceted entrepreneurial prowess likely played a pivotal role in securing such advantageous terms, especially as neighboring retailers recalibrate their strategies and vacate Fifth Avenue addresses. This vacancy trend has empowered companies like Skims Body to negotiate from a position of strength, capitalizing on prime retail spaces in iconic locales. Oxford Properties reports full occupancy for Olympic Tower’s retail segment, constituting 28 percent of the property but contributing over 60 percent of total rental revenue. Negotiations are also underway for office space within the same complex, showcasing sustained investor interest despite recent market adjustments. Institutional investors, who have held the mortgage since 2017, recently witnessed Fitch downgrading seven classes associated with the $760 million loan, due for maturity in 2027. The transition in tenant occupancy has coincided with a 13 percent dip in cash flow, now at $56 million annually, since the mortgage’s initial sale. Skims Body is gearing up for a grand opening slated for February, enhancing its brand presence with a high-profile physical retail outlet.

The company’s meteoric rise is mirrored in its valuation, which surged to $4 billion last year—a staggering $800 million leap from 2022 figures. Versace’s gradual exit from the space since 2018, initially signaled by its subleasing efforts, underscores the dynamic shifts reshaping New York’s retail real estate narrative. As Kim Kardashian’s entrepreneurial ventures continue to make waves across industries, Skims Body’s strategic real estate play exemplifies a nuanced understanding of market opportunities amid evolving consumer preferences and economic landscapes. This move not only solidifies the brand’s physical footprint but also underscores the enduring allure of iconic retail addresses amidst transformative market forces.

Photo credit: Skims

Trump’s Lavish NYC Real Estate Portfolio Shines Despite Temporary CEO Ban

By Columbus International,

For decades, Donald Trump has been a part of the majestic skyline of New York City. His name is emblazoned on some of its most iconic buildings. However, a recent ruling by a Manhattan judge threatens his real estate empire. After facing financial turbulence in the early 1990s, Trump decided to license his name as a strategy to strengthen his global presence and finances without bearing the typical risks associated with real estate development.

This tactic allowed him to enjoy substantial profits while avoiding potential liabilities. His licensing agreements have led to a vast portfolio of luxury hotels and golf courses worldwide, each bearing the Trump brand, contributing to his substantial income. However, most of these investments are concentrated in the United States, with 14 Trump-branded properties generating revenue through licensing or management agreements, as reported by The Washington Post and The New York Post.

Now, with the recent court ruling temporarily banning Trump from his role as CEO of the Trump Organization (found guilty of fraud, the New York judge revoked his business licenses – “a punishment decided after establishing that Trump defrauded banks and insurance companies by inflating the value of his assets to obtain economic advantages and better loans” writes Corriere della Sera), his grip on the real estate world faces a delicate moment, threatening to “deflate” his longstanding influence in the industry he once dominated.

The East Village

Retail Renaissance: U.S. Shopping Defies Odds as Investments Surge and AI Revolutionizes the Landscape

By Columbus International,

Amid global uncertainties and cautious anticipation at the National Retail Federation’s Big Show, U.S. shoppers continue to defy predictions, propelling retail sales and inspiring confidence among major global retailers. The recent Commerce Department report revealed a higher-than-expected rise in December sales, fueled by online purchases and motor vehicle transactions. Senior executives, gathered at the annual expo, are shifting focus from a decade of retrenchment to discuss expanding store portfolios. Despite concerns about the economy and pandemic aftermath, retail real estate fundamentals are predicted to remain robust in 2024.

CBRE forecasts a decrease in the retail availability rate and a rise in asking rent growth, signaling a positive outlook for the industry. While low-income households face financial challenges, economists anticipate sustained consumer spending, provided the labor market remains stable. Traditional mall-based retailers are adapting by closing underperforming stores and turning to smaller, open-air suburban centers for expansion. CBRE predicts that neighborhood and strip centers will maintain occupancy, while mall and lifestyle centers may experience a slight increase in vacancy rates. Industry veteran Stephen Sadove predicts a “reversion to the mean” in 2024, envisioning a post-pandemic world with e-commerce returning to pre-COVID growth patterns.

Despite the rise of AI and other technologies, Sadove remains optimistic about physical stores, citing a net increase in store openings in 2023. The NRF Big Show highlighted the retail industry’s fascination with artificial intelligence, with AI solutions permeating discussions and expo displays. Google Cloud’s Amy Eschliman sees generative AI as a transformational force akin to the internet and mobile phones, capable of revolutionizing customer and associate experiences. Macy’s CFO and COO Adrian Mitchell emphasizes the positive impact of AI on pricing science and inventory allocation, stressing the need for retailers to embrace innovation actively. Ulta Beauty CEO Dave Kimbell sees AI as a tool to complement human connections, enhancing guest services and personalization without sacrificing the essential human touch in retail.

Source: Bisnow

Unveiling the Pinnacle: Time Out’s Picks for the Finest Global Cities in 2024

By Columbus International,

In the realm of entertainment, where cities often take on the role of the main character in beloved TV shows and movies, and serve as the muse for countless songs and artworks, New York City stands out as an iconic destination. Time Out, a prominent media company, has recognized this by naming New York City as the best city for 2024. Drawing insights from the perspectives of around 20,000 city-dwellers globally, as well as input from its network of writers and editors, Time Out curated a list of the world’s best cities.

Criteria such as the culinary scene, architectural marvels, and cultural vibrancy played a crucial role in the evaluation. Time Out aims not only to inspire travel but also to offer a global snapshot of city living. New York City secured the top spot, with its plethora of museums and a thriving theater scene being highlighted as contributing factors. The city’s international reputation also played a significant role, as it was deemed the most desirable location for relocation by city-dwellers worldwide. Claiming the second position on Time Out’s list is Cape Town, South Africa, a city described unanimously by survey respondents as “beautiful.” Its enchanting blend of sea, cityscape, and majestic mountains contributes to its allure. Time Out commended Cape Town for its rich cultural offerings, including late-night museum events, theater, comedy shows at Theatre on the Bay, and the newly opened Time Out Market Cape Town. Despite the accolades, Katy Scott, a Cape Town native now residing in France, emphasizes the city’s contrasts. While praising its unpretentious coastal charm, Scott acknowledges that many of its attractions may not be accessible to the majority of citizens due to persistent inequality.

To gain a deeper understanding of the city and its people, Scott recommends venturing beyond the tourist bubble and exploring sites like Robben Island and the District Six museum, both endorsed by Time Out for their engagement with South Africa’s apartheid history. Time Out’s top five cities also include Berlin, Germany (celebrated for its vibrant nightlife), London, UK (recognized for legendary pubs and free museums), and Madrid, Spain (applauded for exceptional dining and drinking experiences). Notable smaller cities in the top 10 include Liverpool, UK (ranked 7th), and Porto, Portugal (ranked 10th), the latter being lauded for its romantic ambiance according to survey respondents. Grace Beard, Time Out’s travel editor, highlighted the common thread among all the cities on the list—a strong community spirit and an undeniable vibe.

Hell’s Kitchen

Resurgence in Big Apple Retail: A Beacon of Hope Amidst Economic Challenges

By Columbus International,

In the face of the pandemic’s challenges, New York City’s retail sector has not only weathered the storm but has emerged stronger than ever. Unlike many other segments of the city’s commercial market, retail has experienced a remarkable resurgence, with owners seizing opportunities to lease prime spaces at reduced rates and shorter terms, triggering a notable revival. Gene Spiegelman of Ripco remarked, “We’ve seen a fairly healthy amount of recovery, with rents down by an impressive 50%.” This decline in rental costs has sparked a feeding frenzy for well-located spaces, particularly benefiting vacant restaurants and luxury fashion fronts. A noteworthy transaction in this revitalized landscape is Dolce & Gabbana securing the unique former Hermès store at 695 Madison Ave. Similarly, Prada made a significant investment, paying $835 million to retail tycoon Jeff Sutton for a building at 724 Fifth Ave., along with the adjacent structure at 720 Fifth Ave., formerly dominated by Abercrombie & Fitch. Jeff Sutton had initially planned a slender new tower in the area next to the Aman Hotel in the Crown Building. However, it remains uncertain whether this development will proceed as originally envisioned.

The positive momentum in the retail sector is further complemented by favorable changes in mortgage rates. Since November, mortgage rates have been on a downward trend, aligning with a decrease in the 10-year Treasury yield—a crucial factor influencing loan pricing. The easing of these rates reflects optimism that inflation has cooled sufficiently for the Federal Reserve to consider interest rate cuts later this year. Currently, the average rate on a 30-year home loan stands at 6.6%, according to Freddie Mac. While this rate is lower than in previous weeks, it remains significantly higher than the 3.56% recorded just two years ago. This disparity has contributed to a limited inventory of previously occupied homes on the market, dissuading homeowners from selling due to the contrast in interest rates. Despite the easing of mortgage rates, existing home sales experienced a 1% decline in December compared to the previous month, reaching a seasonally adjusted annual rate of 3.78 million—the slowest sales pace since August 2010, according to the National Association of Realtors (NAR). Sales for December fell by 6.2% from the previous year, falling short of economists’ expectations. Lawrence Yun, Chief Economist at NAR, expressed optimism, stating, “The latest month’s sales look to be the bottom before inevitably turning higher in the new year. Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.” In the midst of economic uncertainties, the resilience and resurgence of the Big Apple’s retail sector stand as a beacon of hope, signaling potential positive shifts in the real estate landscape as the new year unfolds.

Global Real Estate Markets in Flux: New York and Milan Buck the Trend

By Columbus International,

The latest edition of the UBS Global Real Estate Bubble Index reveals a significant shift in housing market imbalances across major cities worldwide. According to the report, only Zurich and Tokyo retain their status as being at risk of a housing bubble, marking a substantial improvement from the previous year’s nine cities in this category.

Notably, New York and Milan stand out as cities that have experienced positive adjustments, moving towards fair valuation. The overall trend indicates a decline in housing market imbalances, attributed to the impact of global inflation and rising interest rates over the past two years. On average, real house prices in 25 major cities fell by 5% from mid-2022 to mid-2023. Despite this correction, the report suggests the possibility of further downside in prices. New York, along with Boston, San Francisco, and Madrid, has witnessed a drop in imbalances, leading to a classification of being fairly valued. Similarly, Milan, São Paulo, and Warsaw have also achieved fair valuation status. This transformation is noteworthy as it signals a departure from the bubble risk category and indicates a stabilizing real estate market.

The decline in house price growth is attributed to the substantial increase in financing costs, with average mortgage rates nearly tripling since 2021 in most markets. Annual nominal price growth in the analyzed cities stalled after a 10% rise in the previous year. In real terms, prices are now 5% lower than in mid-2022, erasing most gains made during the pandemic. The sharp drop in housing market imbalances is not solely due to falling prices but is also influenced by inflation-driven income and rental growth.

Mortgage lending growth has halved since mid-2022, leading to a decline in household debt to income, particularly in Europe. However, despite these positive shifts, the affordability of living space remains lower than pre-pandemic levels. Some cities are already witnessing the seeds of the next property price boom. Hybrid working has not significantly weakened demand for city living, and a housing shortage is anticipated as fewer building permits have been issued, especially in European urban centers. In the Americas, while Miami and New York show varying trends, New York’s housing market is on a strong comeback, with a 3% increase in real prices between mid-2022 and mid-2023. Conversely, Boston’s housing market dynamics have weakened. In Europe, Milan stands out with a 2% drop in real prices, attributed to local rental and income growth, but with solid economic prospects.

Mercato immobiliare New York

New York City Rental Market Shows Signs of Cooling with Increased Vacancy Rates

By Columbus International,

The residential rental market in New York City has been gradually cooling, with an increase in inventory and a rise in the rental vacancy rate in Manhattan to 3.4 percent, the highest level since July 2021. According to the December market report by Miller Samuel for Douglas Elliman, the median rental price in Manhattan remained flat at $4,050 per month on a year-over-year basis. In contrast, Brooklyn’s median rent increased by 5 percent to $3,469, although it was still down from its record high in July.

The higher vacancy rate in Manhattan suggests that rents are likely to decrease further across the five boroughs in 2024. This shift is attributed to landlords facing challenges in retaining tenants, leading to an anticipation of weakness in the market. The overall economic climate, coupled with the Federal Reserve’s promise of interest rate cuts next year, supports this trend. Listing inventory has grown in both Brooklyn and Manhattan over the past year, resulting in declining average rents and significant increases in new leases signed in December. Manhattan’s average asking rent decreased by 3.8 percent from November to December, reaching $4,952, and dipped 5.6 percent from the previous year. Meanwhile, new residential leases in Manhattan increased by nearly 8 percent to 3,632, a 14 percent year-over-year growth. Brooklyn experienced a decrease in the average monthly rent to $3,754 in December, down 0.8 percent from the previous month and 1.6 percent from December 2022.

However, the median rental price rose by 5 percent year-over-year to $3,469. The listing inventory in Brooklyn increased by 8 percent compared to the previous year, with a 115 percent surge in the number of new leases signed. In Queens, Elliman and Miller Samuel tracked only Long Island City and Astoria. Average asking rents in these areas rose by 6 percent month-over-month to $3,601, and nearly 10 percent on a year-over-year basis. The number of new leases signed in northwest Queens increased by 26 percent from the previous month and 58 percent from December 2022.


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