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Weekly Market Report - February 27, 2020

SL Green is quietly planning to sell 609 Fifth Avenue as it is trying to cut back from WeWork. All 140,000 square feet of office space in this building is leased by the company. WeWork’s rent is beginning in April and the company is currently building out the property. It will take them at least to the end of 2020 to finish preparing the space to lease out to clients. SL Green has only one other space with WeWork in the city at 2 Herald Square, where WeWork is subleasing 124,000 square feet to Amazon. If WeWork drops out of that location, SL Green said they would sign a deal directly with Amazon.

In the New York area, the number of bank branches fell 6.8 percent in the 12 months through June, compared to the 2.2 percent for the same period last year. It was the highest rate among all the major U.S. markets. Reasons for the closures include mergers and acquisitions in the industry, and the rise of mobile apps that allow banking anywhere and anytime. Bank branches have been in decline across the country since 2009 after peaking with almost 100,000 stores. In the past decade, more than 13,200 branches have closed as the industry shifts to digital platforms. The top 25 banks in the U.S. have more than doubled their pace of closings in the past three years, and the rate may increase as more property leases expire. Even with the closings, business in banks is growing. Deposits nationwide rose 4.1 percent to $12.8 trillion in 2019.

Last week, the Supreme Court ruled that the building permit given to developers at 200 Amsterdam Avenue should be revoked. In 2018, the developers got the green light to go ahead with the building after the city’s Board of Standards and Appeals said they were not in breach of zoning rules, and now the building is topped at 52 stories. They were able to reach this height by pulling together multiple lots. But now, they might have to demolish almost 20 stories from the building following the new ruling. Attorney’s for the developers say at least 20 other buildings that are already built could be affected if the ruling isn’t overturned on appeal. Other buildings include 150, 160, and 170 West End Avenue, 200 Park Avenue, and the Lincoln Square Synagogue; they all used partial tax lots to build.

Lower Manhattan is the home to some of the worlds most valuable commercial real estate, but by 2050 about 37 percent of these buildings will be under threat from storm surges. By 2100, 50 percent of buildings will be under threat from store surges, and 20 percent of Lower Manhattan streets will be at risk of floods every single day. The city has seen this threat before from Superstorm Sandy in 2012. The storm caused $19 billion in damage and forced the closure of a quarter of the Financial District. Now, landlords are taking individual action to protect their assets. The federal government is weighing the options of a massive sea wall, but some say that it doesn’t prepare for future sea-level rises. Developers and landlords are going to have to figure out how to adapt as things change. Development is still growing in areas most at risk, mainly because those areas are attractive places to live and work. Companies are moving their utilities from the basement to higher floors, as well as creating buildings with the first floors being higher than the 100-year flood level.

Top Sale:

SL Green announced it sold 315 West 33rd Street and a piece of land next to it for $446.5 million. The mixed-use building has 333 residential units and 270,000 square feet of office space. The deal is expected to close next quarter.

Top Lease:

National Grid, an energy company, leased 87,000 square feet at 2 Hanson Place in Downtown Brooklyn. It is for 15 years, and the company is taking the entire 11th and 12th floors by the end of 2020.

Trader Joe’s is opening a store in a city-owned space under the Ed Koch Queensboro Bridge. The space is 50,000 square feet, and it was approved by the Community Board 8 Landmarks this week.

Software firm Celonis is taking 34,000 square feet on the entire 87th floor of One World Trade Center. Asking rents were $85/foot, and now the building is over 85 percent leased.

Top Financing:

Bank of China loaned $105 million to the Moinian Group for its residential building at 572 11th Avenue. The financing comes at a fixed rate of 2.8 percent for 10 years. The building is over 183,000 square feet and has 164 apartments and retail space.


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