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Weekly Market Report - August 5, 2021


ESRT braces for more pain at Empire State Building

Empire State Realty Trust is bracing for its second largest tenant to exit its most iconic office property. While the real estate investment trust reported a second quarter uptick in leases across its portfolio, CEO Tony Malkin shared the news on Thursday that GBG, which leases 353,000 square feet at the Empire State Building, had just filed Chapter 11 proceedings. GBG has already subleased 162,000 square feet of space to a single tenant, said ESRT Chief Financial Officer Christina Chiu. She added the REIT will continue to receive rent payments directly from the subtenant as GBG goes through its restructuring process. r the remaining GBG space — the company still has six years on its lease — ESRT will draw on the tenant’s $17 million letter of credit, which is not part of the bankruptcy. That still leaves $1.6 million of rent outstanding, which will be written down in the third quarter, Chiu said.


Manhattan office rents hit 4-year low as availability remains at record-high

Manhattan’s office availability rate held steady at 17.1 percent in July, matching the record-high set two months ago, as asking rents dipped to their lowest level in years. The high availability rate was despite the fact that Manhattan’s office leasing volume in July was up 15 percent compared to June. July’s leasing volume of 2.35 million square feet was well above last year’s monthly average of 1.58 million square feet. But it was still nearly 35 percent below 2019 levels, when the pre-pandemic market averaged 3.58 million square feet per month. Sublease availability also climbed, reversing the downward trend seen in the prior three months. Net sublet availability in July rose by 360,000 square feet to 21.61 million.


American Dream, a Giant Mall Outside Manhattan, Aims to Ride Luxury Wave

The sprawling shopping mall and entertainment center called American Dream is opening its luxury retail wing next month, a sign of budding momentum for the suburban New Jersey complex after a run of early setbacks. The mall’s high-end shopping area is poised to open Sept. 17, according to Triple Five Group, the Canadian real-estate firm that developed the complex. It will boast many of the world’s premier luxury brands, including Hermès, Tiffany & Co., Dolce & Gabbana, and a Saks Fifth Avenue department store. The new wing is important to American Dream because luxury-goods retailers reported a recovery in sales, starting late last year, from shoppers eager to spoil themselves or friends after the pandemic-related lockdowns.


Twitter, Google latest big companies to delay office returns

Two more major tech companies are dialing back plans for a return to the office, in the latest reaction to the spread of the Delta variant. Google will not be requiring its employees to return to the office until October, with no employees required to report in-person until Oct. 18, the New York Post reported. There is a chance the return date will be pushed back again, though employees will receive 30 days’ notice. The company expects its employees to work in-person at least three days a week post-pandemic. The delay isn’t the only significant change from Google: The search giant will also mandate vaccination, according to the Post.


Wegmans to replace Astor Place Kmart

Wegmans Food Markets aims to open the store at Vornado Realty Trust’s 770 Broadway in the second half of 2023, Wegmans and Vornado announced. It will be the second Wegmans in New York City, following the opening of its first store in the Brooklyn Navy Yard in October 2019. “We are so excited to bring Wegmans to Manhattan. This is something we’ve been dreaming about and working toward for a long time,” said Colleen Wegman, president and CEO of Wegmans Food Markets, in a statement.


Despite rent-deferral agreement, landlord claims Equinox still won’t pay

Paramount Group says its bargain with Equinox is off. Paramount wants Equinox to pay $1.57 million under its original lease, including $1.3 million which Paramount was willing to defer until 2022. The haute gym agreed last September to pay half its approximately $138,000 base rent for 28,000 square feet at 1633 Broadway, plus a percentage equal to any capacity permitted under government Covid restrictions, according to Paramount. From December to May, for example, when gym capacity was limited to 33 percent, Equinox owed half its monthly rent plus an additional 33 percent of base, or about $114,000 per month, under the terms of the agreement. In exchange for partial payment, Paramount would defer all rent owed during periods of required business closure until 2022. The remainder of rent due from periods of partial payment would be deferred until 90 days after all capacity restrictions were removed, Paramount claims. But after Equinox allegedly failed to cure a May default notice, Paramount cancelled the agreement.

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