New York City office investors bet big despite high vacancies

The commercial building sales market faces a perfect storm of challenges: from inflation and new work from the average home, to high interest rates and a dearth of financing.

Funding releases recently prompted an $855 million deal for the HSBC building at 452 Fifth Ave. , across from Bryant Park, which Eastdil Secured was marketing.

The buyer, Innovo Property Group, failed to secure support because the building’s tenant, HSBC, was leaving. Now, Israeli sellers, PBC USA, can put $35 million into their pocket.
A deal disaster could potentially stop anyone else making a deposit for a building with no cash on hand.

“Anything that needs capital or formality in a vacant lot, or needs renovation or needs financing at higher rates today — these deals are re-priced,” said Douglas Harmon, head of capital markets at Cushman & Wakefield. “Modern, high-quality assets that rent out well are still very much in demand.”

Harmon offers 500,000 square feet of office space at 575 Fifth Ave. An expected price north of $400 million.

In 2014, 450 Park Ave sold. for $545 million. It was recently resold to SL Green for just $445 million.
Louis Weiss

And while investors are still bidding bullishly – banking on the long-term recovery of the office market – it has become costly to make deals, despite there being plenty of cash on the sidelines.

said Andrew Scandalios, co-founder of JLL Capital Markets. “A lot of people don’t have it, and it will affect their deals and investment portfolios.”

Scandalios predicted that both working from home and moving to a better quality space around the nodes of relocation “will change the nature of office markets.”

“The Grand Station is hot again.”

Darcy Stacom, Chairman and Head of Capital Markets at CBRE

Earlier this year, 475 Fifth Ave were sold. at 41st Street opposite Public Library and Bryant Park, through Darcy Stacom, Chairman and Head of Capital Markets at CBRE, to RFR for $291 million, with current tenant Penske Media contributing half of the capital.

“Grand Central is getting hot again,” says Stacom, thanks to the opening of One Vanderbilt and the excitement surrounding the upcoming 175-foot 1,575-foot Park Ave that will surround the east side of the Grand Central Terminal with the Hyatt perched on top.

“[For] “Leasing brokers, it’s a very positive thing,” Stacom said.

It also marketed 139,000 square feet of office space above the Puma store at 609 Fifth Ave. For SL Green. He is now in a contract worth $100.5 million, or $723 a foot.

The exterior of the Puma store.
Office space is 139,000 square feet above the Puma store at 609 Fifth Ave. Now it’s under contract for $100.5 million, or $723 a foot.
Louis Weiss

The newest office building to hit the market, 1330 Sixth Ave. , located a little further north between West 53rd and 54th Streets. Blackstone and RXR gave the sales assignment to Eastdil Secured with a target of $350 million, or $658 a foot. Seller RXR spent $400 million in 2010 for the seized building when Harry McCullough defaulted on debt after paying $498 million in 2007.

One broker, who asked not to be identified, said office building rates generally spread from $600 to $1,000 per foot depending on the rent needed and capital improvements.

Due to lower rents in the retail area negotiated during the pandemic with new tenants Bank United and Aston Martin, 450 Park Ave is being sold. Through Stacom to SL Green Realty Corp for $445 million — compared to Oxford and Crown sellers at $545. Paid in 2014.

In March, the 2,693-square-foot retail space at the 1,600-Broadway base in Times Square — which was occupied on a long lease by M&M and two labels (each fetching more than $1.1 million in rent) — was sold by Harmon of Sherwood Properties to Paramount for $191.5 million.

The exterior of the M&M store in Times Square.
M&M World’s retail apartment sold for $191.5 million, with two spaces for initial signage.
Louis Weiss

Diagonally across the street at 30 Times Square, also known as 719 Seventh Ave. Eric Anton, Senior Managing Director of Marcus & Millichap, markets the smaller but newly vacant 10,040 square foot SL Green building. Much of its $60 million value is the 5.2 million pixels glowing on six banners covering 5,800 square feet of its facade.

All of these deals are evidence that despite the growing challenges in the market, any ripple or pause is seen as an opportunity by those who want entry or expansion into the Big Apple at some of the lowest price points in years.

Adelaide Polsinelli, Vice President of Compass, is selling property at 230 W. 72nd St. , which I showed to 20 to 30 smaller developers.

“Ninety percent of the buyers I work with are new and have never bought in New York before and realize that prices are at a low point. Smart money buys, and that’s how families build their legacy.”

Adelaide Polsinelli, Vice President of Compass

“These buyers come with new eyes,” she said. “Ninety percent of the buyers I work with are new and have never bought in New York before and realize that prices are at a low point. Smart money buys, and that’s how families build their legacy.”

A Korean union that was its first buyer in the United States and New York City, Eugene Asset Management, has paid $267 million for the Lyric condominium tower at 255 W. 96th St. , which was sold on behalf of Related by Harmon.

“It shows that global capital is still chasing residential New York City and, in this case, competing for local buyers,” Harmon said.

Blackstone bought a 49% stake in the new office tower in One Manhattan West in a deal marketed by the Harmon team on behalf of Brookfield and the Qatar Investment Authority, which revalued it to $2.85 billion.

Represented by Stacom, Google has completed the $2.1 billion purchase of its still-to-construct 1.3 million square foot office building at 550 Washington Street in Tribeca near its other new offices at Pier 57.

However, some properties have been floating in the sales market for most of the pandemic, pending a price improvement or owner refinancing.

Exterior of 550 Washington Street.
Google has completed a $2.1 billion purchase of its still-in-progress 1.3 million square foot office building at 550 Washington Street.
Oxford Properties / COOKFOX Architects via AP

“We have done a lot of reviews and advised clients on what to do and when to do it, and I think most of what has been checked out [from the market] “Or it wasn’t launched because of what was happening in the credit market,” Scandalios said.

Another broker, who asked not to be identified, noted that “some men who have paid out are more shocked and worried about holding onto their wallets and trying not to be swallowed up by lenders and not to go out to buy.”

In March, the Court Square Queens development site planned for a 66-story tower with valid plans and permits was sold to Carmel Partners for $176 million through Woody Heller, co-founder of Branton Realty Services. The vendors, Stawski Partners, have laid the foundations for qualifying the 900-plus future units for exemption 421a, which expired June 15.

Bob Kancal, co-head of capital markets at JLL, said the lack of an ongoing Type 421A tax break program has now put the kibosh on land sales in the outer neighborhoods and the construction of rental apartments. He said Manhattan lands were still in circulation, but only for building new housing units.

Exterior of 160 Riverside.
Grab A&E 160 Riverside Blvd. for $400 million.
Christopher Sadowsky

Although the conversion market that upgraded rents to condominiums or co-ops died with a 2019 state law requiring 51% of existing tenants to purchase their units, older office towers intended for residential use are starting to pop up downtown.

Rudin Management has been contracted through Eastdil Secured to sell 55 Broad St. To the Silverstein and Metro Loft Management project, which was the most active downtown converter for rentals.

Similarly, in a direct deal, Metro Loft and Jeff Jural Real Estate are contracting to purchase 4 New York Plaza aka 25 Water St. It is a million square foot tower and needs more windows to capture views of the harbor. The seller, Edge Funds, bought it for $270 million in 2015 and has a mortgage of $250 million. The previous tenant and owner, JPMorgan Chase, had been trying to sublet and save when the lease expired in January 2025.

“These are interesting times as assets are being renamed, transferred and re-priced. I expect the volume of transactions in the second half of the year to be lower than what we enjoyed during the same period in 2021.”

Douglas Harmon, Head of Capital Markets at Cushman & Wakefield

Polsinelli advised some real estate, pointing to issues such as zoning and regulations that require more exits: “You can’t just convert some of these properties into residential.” “It’s not like shoo-in where you turn and turn.”

That’s another reason Governor Hoochul signed a law this month that makes it easier to convert hotels into affordable housing by easing zoning and financing restrictions.

Residential sales are also boosting the market.

In one of the biggest residential sales of the year, the angular connected American copper buildings at 636 First Ave were sold. on East 33rd Street to Michael Stern’s JDS and Baupost Group to Josh Gotlib’s Black Spruce Management for $837 million by Harmon.

Two other residential towers are being sold by Equity Residential. The former Trump Place rental at 140 Riverside Blvd has been sold out. , with 354 units, was acquired by Stacom in April for $266 million for A&E Real Estate of Douglas Eisenberg.

The ease of that deal secured A&E, now one of the city’s largest rental owners, a nearly $400 million contract to purchase 455 units of 160 Riverside Blvd from Equity, sources said. Both towers were built by the Trump Organization as buildings 80/20.

A&E also purchased the 1,000-unit, 22-building Cunningham Heights complex in Queens Village for $130 million earlier this year.

JLL offers another 80/20 rental tower at 160 Madison Ave. For $400 million with less easing and financing for a few more years. Bo Concept Store is undergoing renegotiation of pandemic rent which will be increased in four years.

“These are interesting times as assets are being renamed, transferred and re-priced,” Harmon said. “I expect the second half of the year to be lower than what we enjoyed during the same period in 2021.”

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