commercial real estate

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

By Columbus International,25 March 2024

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,20 February 202420 February 2024

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.

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

By Columbus International,30 January 2024

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,24 January 2024

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.

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

By Columbus International,23 January 2024

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,17 January 2024

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.

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

By Columbus International,17 January 2024

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.

Manhattan Real Estate Sees Record Cash Transactions Despite Mortgage Rate Surge

By Columbus International,4 January 2024

Manhattan’s residential real estate landscape is witnessing a historic surge in cash transactions for condominiums and co-ops, setting a new record despite recent signs of a slight easing in mortgage rates.

According to the Manhattan quarterly sales report by Douglas Elliman, compiled by appraiser Miller Samuel and released on Wednesday, cash sales accounted for over two-thirds of transactions in the fourth quarter, marking a significant increase from the third quarter’s 56.7%. This surge in cash purchases is attributed to a “sharp rise” in mortgage rates, reaching the highest levels since 2000.

Freddie Mac data reveals that by October, the 30-year fixed-rate mortgage had climbed to nearly 7.8%, a level not seen since 2000, driven by the Federal Reserve’s series of rate hikes over the past two years. However, there was a slight decrease below 7% in mid-December, and recent indications suggest a continued downward trend in rates. The Federal Reserve has hinted at the possibility of further rate cuts this year, which could potentially stimulate the sales market.

The fourth-quarter report also highlights a 5.1% year-over-year increase in the median sales price in Manhattan, reaching $1.16 million. This uptick marks the first increase in five quarters and represents the second-highest fourth-quarter level on record. Concurrently, the year-over-year listing inventory declined for a third consecutive quarter, contributing to the overall market dynamics.

Jonathan Miller, the President and CEO of Miller Samuel, anticipates that potential rate cuts by the Federal Reserve could invigorate the sales market, diverting demand from the highly competitive rental market. This shift in demand is evident in a separate Elliman report, revealing a drop in the median rent in November for the first time in over two years, signaling a cooling trend in Manhattan’s previously red-hot rental market.

Valentino’s latest boutique has just landed at 654 Madison Avenue (Source: V Magazine)

By Columbus International,10 November 2023

Valentino‘s latest boutique has just landed at 654 Madison Avenue. After introducing their innovative global retail concept in 2022, which revolves around creating distinctive spaces based on a reinterpretation of the building’s structure through various sales experiences and approaches to interior architecture, the new flagship store in Manhattan is now a pivotal destination for Valentino enthusiasts. Boasting a selling space of 1142 sqm, the new establishment is situated on the corner of Madison Avenue and 60th Street. The building spans three floors, including a basement, a ground floor, a mezzanine, and a second floor. Adorned with iconic columns and tall windows, the space is meticulously designed to provide a glimpse into the materials and architectural silhouettes that define the essence of the boutique’s interiors.

Each floor narrates a unique visual story through chromatic compositions and thoughtfully curated materials palettes, incorporating the maison’s signature red tone. Upon entering, customers are welcomed by grand double doors featuring sculptural marble handles, inspired by the work of artisans whose creations are showcased in Valentino stores worldwide. These handles, crafted in ceramic by the artist Massimiliano Pipolo, are also incorporated within the store. Visitors can explore the grand features of the building, including seven-meter-high ceilings, exposed steel columns (spanning all floors), and a rough concrete finish around the perimeter, highlighted by illuminated shelving dedicated to Valentino Garavani Accessories.

The space is intelligently divided into functional zones through bespoke elements, such as a commanding green onyx display unit at the center, and diverse materials like marble carpets and concrete on the floors that delineate specific areas and functions. Towards the rear of the store, various interpretations of the iconic Rosso Valentino are displayed, along with a dedicated area for footwear featuring floors and seating in contrasting travertine red against the luminous onyx and concrete shelving. On the second floor, the Valentino Women Ready-to-Wear collection is showcased in oversized red lacquered wardrobe structures and matching seating, complemented by chequered floors in white Botticino and black Nero Marquina marbles. La nuova boutique di Valentino è appena sbarcata al 654 di Madison Avenue

Source and Photo: V Magazine

U.S. Housing Market Defies Odds: Rising Home Prices Persist Amid Economic Uncertainties

By Columbus International,17 October 2023

In recent months, the U.S. economy has stood at a crossroads, teetering between the specter of recession and the persistent challenge of soaring inflation. Amidst these financial uncertainties, a surprising resilience characterizes the housing market, where demand remains robust, and home prices continue to ascend.

Resilience in Housing Market Despite Economic Divides
Efforts by the Federal Reserve to curb inflation have led to significantly higher borrowing costs, marked by a 22-year high in mortgage rates. Despite these elevated rates, the housing market has defied projections of a decline. Goldman Sachs, in a notable revision, now forecasts a 1.8 percent increase in average home closing prices by year-end, a significant shift from their prior estimate of a 2.2 percent decline. This resilience can be attributed to the relentless demand for housing and a limited supply in the market. Strong demand, driven by a variety of factors including demographic trends and a growing population, coupled with constrained housing inventory, has fueled consistent price hikes. The situation is reflected in the recent revision of Goldman Sachs’ home-price forecast, indicating that the market remains on an upward trajectory despite the prevailing economic uncertainties.

Commercial Real Estate Faces Challenges
In contrast to the housing market’s buoyancy, the commercial real estate sector grapples with multiple challenges. The lingering effects of the pandemic, such as rising office vacancies, combined with the Federal Reserve’s efforts to control inflation through interest rate hikes, are impacting this sector. Higher interest rates are particularly concerning, leading to anticipated commercial mortgage renegotiations in the next few years. Regional banks are notably vulnerable in this scenario, exposing potential risks in the commercial real estate sector. The divergent fates of the housing and commercial real estate markets underscore the specific dynamics at play in each sector. The housing market’s resilience is attributed to its strong fundamentals and the essential need for shelter, while the commercial real estate market faces complexities due to evolving work trends and economic policies.

Yield Surge Raises Economic Eyebrows
The surge in the 10-year U.S. Treasury note yield to a 15-year high at 4.258% raises concerns about the potential economic impact. Higher yields could lead to increased borrowing costs, affecting various markets, including stocks, bonds, and housing. Of particular concern is the potential impact on mortgage rates, which could pose challenges for both prospective homebuyers and those seeking to refinance. The housing market, though displaying remarkable resilience, is not entirely immune to these economic shifts. An increase in mortgage rates could alter the affordability dynamics, potentially slowing down the rapid pace of home price increases. Investors and industry stakeholders closely watch for cues on how these yields might stabilize and their subsequent influence on the housing market.

Federal Reserve Balancing Act
The Federal Reserve’s cautious approach, as reflected in the minutes of their July 2023 meeting, showcases the delicate balance they strive to maintain. Controlling inflation remains a priority, and this is evident in the interest rate hikes implemented to slow the economy and curb rising prices. However, the Fed grapples with the need to carefully weigh these actions against their potential negative impacts on the economy, such as slowing hiring and increased business loan costs. The central bank’s actions are being closely scrutinized by various sectors, including the housing market. Their decisions significantly impact borrowing costs and, subsequently, housing affordability. Striking the right balance is crucial for the Fed to navigate the complex economic landscape and support the stability of both the housing market and the broader economy.

Housing Market Defies Mortgage Rate Surge
The surprising resilience of the U.S. housing market in the face of soaring mortgage rates stands as a testament to its robustness. Despite rates doubling over the past year and a half, major homebuilders’ shares have rallied, surpassing broader stock indices. The constrained housing supply, coupled with higher mortgage rates, has essentially trapped existing homeowners in their properties, diminishing available housing stock and compelling potential buyers to explore new properties. This resilience is underpinned by the fundamental need for housing. Regardless of mortgage rate increases, the demand for homes remains high, particularly due to demographic trends and societal shifts. The housing market has adapted to the new normal of higher rates, showcasing its strength and stability amidst evolving economic conditions.

A Glimpse into the Future
While concerns about the U.S. housing market persist due to the rapid rise in mortgage rates and a sharp slowdown in home sales, economists and analysts foresee a moderate market correction, rather than a crash on the scale experienced during the Great Recession. Factors such as low inventories, cautious building practices, demographic trends, strict lending standards, and low foreclosure activity contribute to the market’s resilience. These indicators, combined with the enduring demand for housing, hint at a market that is likely to continue its upward trajectory in a more measured manner. The housing sector is expected to adapt and find equilibrium even in the face of economic uncertainties, reinforcing its position as a cornerstone of the American economy. The U.S. housing market remains a pillar of strength amid economic uncertainties, continuing to surprise pundits and analysts with its unwavering growth. As the economic landscape evolves, only time will reveal whether this resilience is a temporary phenomenon or a lasting testament to the fundamental stability of the housing sector in the United States.