Weekly Market Report - April 15, 2025
- Broker Support
- Apr 17
- 6 min read
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Rents at the 50-story tower top $200 psf
The Soloviev Group has landed three long-term leases at its trophy office tower at 9 West 57th Street.
The Soloviev Group has secured three long-term leases at its office tower at 9 West 57th Street. The largest lease was signed by energy company Hess Corporation, with 19,500 square feet on the 46th floor. Investment firm Platinum Equity Advisors and hedge fund Beaconlight Capital also leased space. Starting rents ranged from $200 to $240 per square foot. The building, located in the Plaza District with Central Park views, is 96 percent occupied. Stefan Soloviev, who took over the firm in 2020, has led a turnaround at the skyscraper, which was built in 1974 and was notoriously picky about leasing. A $45 million renovation included upgrades to the lobby, elevator, and technology system. The building also features a fitness center with two pools and a golf simulator. Other tenants include Apollo Global Management, Chanel, and Loews Corporation.
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Vornado Realty Trust is considering selling office towers and using the proceeds to build apartments, a strategy likely to be supported by those advocating for more housing around Penn Station. CEO Steven Roth stated in his annual letter to shareholders that people want to live in New York and there is a major shortage of apartments. Roth's enthusiasm for residential development suggests he may be coming around to Assemblyman Tony Simone's proposal to develop more high-rise housing around Penn Station. This proposal would scale back Roth's "promised land" plan, which he called "promised land" – a plan to build around 18 million square feet of supertall office towers in the neighborhood, effectively another Hudson Yards.
Vornado is New York's second-largest commercial landlord, with most of the firm's 20 million square-foot portfolio being Midtown office towers. The firm also developed the supertall apartment tower at 220 Central Park South and reaped $3.3 billion in proceeds from selling the units. Roth said in his letter that apartment buildings cost less to build and maintain than office towers, which he described as "capital hogs." A 500,000 square-foot apartment building would cost $400 million less to build than an office tower and doesn't require an anchor tenant to secure a construction loan.
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Slowing economy, trade war adding to industry’s concerns
JPMorgan Chase has warned investors against commercial real estate debt due to global economic uncertainty. The bank has downgraded its recommendation on real estate investment trust credit from "neutral" to "underweight." The bank emphasized the risks for industrial sector landlords, who are in the "eye of the hurricane" due to potential trade war impacts. Warehouses and last-mile facilities have been strong performers in New York and beyond, but are now in the "eye of the hurricane."
JPMorgan is not as concerned for office owners, as office demand has been consistently weak. However, JPMorgan cannot avoid commercial real estate debt in the short term due to the widening spreads for high-quality commercial mortgages and riskier investment-grade loans. Higher spreads could make refinancing properties harder and increase the challenge of selling properties to pay off debts. Institutional investors are also prepared to seize the moment, as Blackstone closed on an $8 billion commercial real estate debt fund last month.
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Investor is in contract to buy 5 Hanover Square from CIM Group
David Werner, a New York investor, is in contract to buy the office building at 5 Hanover Square in the Financial District from CIM Group, with a contract price of between $50 million and $60 million. Werner has been buying older office buildings in the Financial District and Midtown at deep discounts, many of which he is converting into apartments. The 25-story, 340,000-square-foot 5 Hanover is about 50% vacant and would most likely be a partial conversion. CIM Group bought 5 Hanover in 2013 from Christopher Schlank and Nicholas Bienstock’s Savanna. The Financial District office market has struggled since the pandemic, with the Downtown availability rate being north of 20% as of the first quarter. Werner and partner Nathan Berman secured a $90 million loan for their residential conversion of the office building at 675 Third Avenue. They recently purchased the building from the Durst Organization for over $100 million. Werner is also flipping the office portion of the nearby 300 East 42nd Street for $52 million.
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Concerns over buildout costs, economy pause some deals
Retail and office tenants in New York City are putting lease plans on hold or scrapping them as they wait for more clarity on President Trump's tariffs. Concerns about inflation, the cost of building materials, and high interest rates are shaking up the leasing market, which has been riding a wave of good news in both the retail and office sectors over the last several quarters. Manhattan office leasing volume reached 12.2 million square feet in the first quarter of this year, the most since the fourth quarter of 2019.
On the retail side, the first quarter's rolling four-quarter leasing volume saw 14% year-over-year growth. However, the market could grind to a halt given the last week's headlines. Retail businesses are more vulnerable to tariffs in the short term because they either have to absorb the costs themselves or pass them down to consumers, who then modify their spending habits. The office market is less acute, though still tied to broader economic conditions. If the global economy tanks, that is going to have a big impact on the office market, and it will cause companies to maybe hit the pause button on taking more office space.
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The developer fell behind on debt payments for 459 Broadway and 427 Broadway during pandemic
Rialto Capital has negotiated a peace deal with Chetrit Organization, a developer that provided a three-year loan extension on two Soho properties. The developer fell behind on the $76.5 million loan backed by 459 Broadway and 427 Broadway during the pandemic in 2021. Michael Chetrit of Chetrit Organization inked the deal to extend the loan and bring the loan out of special servicing. The two five-story office and retail buildings struggled with vacancies and had to be refinanced.
The loan's debt service coverage ratio slipped to below 1, meaning revenue could not meet its monthly debt payments. By late 2023, occupancy rose to 100%, but the properties landed back in special servicing a year later. Chetrit Organization is grateful for Rialto's creativeness and willingness to work with them to come to an amicable resolution. Rialto acquired a chunk of the former Signature Bank's loan portfolio in 2023 and has not shied away from launching foreclosures against borrowers, angering many borrowers who thought they signed on for loans with the customer-friendly Signature Bank.
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Disruption of foreign trade could bring lower occupancy rates, reduced property values and less industrial development by port cities
President Trump's tariff blitz could weaken demand for coastal industrial properties, potentially sending the sector into a tailspin. Dwindling foreign trade would bring lower occupancy rates, reduced property values, and less new development around port cities, with Los Angeles, Houston, Savannah, Ga., New Jersey, and other coastal regions expected to be hardest hit. The logistics business would likely ripple through local economies, with tens of thousands of people working in warehouses and distribution centers, while hundreds of thousands are employed by trucking, shipping agents, manufacturers, and small businesses serving port workers.
The industrial real-estate business, which has about 16.8 billion square feet, looks especially vulnerable. If Trump's tariffs spark a manufacturing renaissance, developers will build more inland logistics hubs, benefiting industrial markets in Arizona, Georgia, and Illinois. However, analysts say it will take years for supply lines and industrial property to readjust to a new world of tariffs and more restricted trade. Most industrial real estate is concentrated around ports and looks poised for hardship unless Trump eases up on his tariff plan.
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Carlyle, a private equity firm, has purchased another self-storage facility in East Flatbush, Brooklyn, for $50 million. This marks the sixth self-storage building the firm has acquired in the five boroughs, bringing its investment in the sector to about $178 million. Carlyle's self-storage portfolio now includes 145 18th St. in Greenwood Heights, 163 Sackman St. in Brownsville, 651 Utica Ave. in East Flatbush, 302 Dyckman St. in Inwood, and 74-16 Grand Ave. in Elmhurst, Queens. All properties were purchased in 2024. The Cayre Equities founder, Kenneth Cayre, signed the deed for the seller. The self-storage bonanza is a shift from Carlyle's main residential portfolio, which includes several residential buildings in Brooklyn, including the 23-unit 25 Lexington Ave. in Clinton Hill, the 123-unit 8 Marcy Ave. in Williamsburg, and the building planned for 267 Bond St. in Gowanus. In Manhattan, the group owns the 150-unit 165 E. 66th St. for $128 million in November.
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