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Weekly Market Report - February 13, 2020

As a part of its decision to close stores, lay off workers, and put more money into e-commerce, Macy’s has decided to move its corporate headquarters to Long Island City. It has been at 11 Penn Plaza for many years, and while the corporate team will be moving to LIC, the company is to maintain a smaller Midtown office within its store on West 34th Street, its flagship location in Herald Square. Its new LIC space is in The Jacx, which is an over one million square foot office complex. While Macy’s has been trying to find a new tenant for its 640,000 square foot space at 11 Penn, the company will be leaving this space in May. Upon new details being revealed, Macy’s is building an office tower on top of its flagship store in Manhattan with over 1.5 million square feet in office space. The tower will have a sky lobby with views of the city, as well as, upgrades to the surrounding area with subway stations. The company has been in talks for this project since last year and plans are still being worked out.

­Vornado is determined to replicate Hudson Yard’s success and lure tech companies to make the neighborhood around Penn Station the new hot spot. The company is spending more than $2 billion to redevelop over five million square feet. However, this area needs a major upgrade. Today, Penn Station is the busiest transit center in the Western Hemisphere as an estimated 650,000 people use the station a day. In 2010, a fully funded $8.7 billion project was set to start construction on the station, but Governor Chris Christie stopped it – and it has been stalled ever since. Besides Penn Station, several buildings within a block of the station will be getting revamped, including Penn 1, Penn 2 and the James A. Farley Post Office. The post office will be open at the end of this year with new offices and a new concourse. Penn 2 will get a new façade, lobby and rooftop terrace. At Penn 1, co-working company Industrious is in talks to manage almost 10,000 square feet of office space. If all goes well. Vornado wants to tackling Hotel Pennsylvania next.

Since WeWork’s decline last year, it has now brought down investor’s confidence in the property-technology industry. Only 45 percent of proptech investors said they are planning to make more investments in 2020. This is a decline from last year’s 64 percent. Investors are likely to move away from companies like WeWork and focus more on technological innovations that can disrupt the real estate industry. Eight one percent of startups have said that in 2020, they are expecting it to be easier or about the same as in 2019 to raise venture capital.

In recent years, New York City, as well as other big cities, have had a building boom. In New York, construction spending will reach $189.5 billion between 2019 and 2021. However, the construction era has stalled. It is being hampered with rising costs, tight labor pool, and new requirements for building sustainability. Design trends are also changing. For example, people are pushing back on an open floor layout. Also, the need for light, air, and space that promotes wellness are still in high demand and some companies want different types of materials, rather than just glass.

In 2019, Chinese investors sold off billions more in U.S. commercial property than they bought. For the first time since 2012, foreign investors were net sellers of U.S. commercial property. In 2019, foreign investors sold $63 billion and only bought $48.7 billion. The Chinese were the biggest sellers, selling off $20 billion more than they bought. In China, investors are under pressure from Beijing to bring money back home. Japan, Canada, and the U.K. are also selling back their U.S properties. Their exit is putting new pressure on the market as property values have leveled off, new state and federal regulations are kicking in, and investors are seeing few catalysts to push prices higher.

In the second half of 2019, leasing velocity declined while the average volume remained well over the levels experienced in the past two years. Direct, ground floor activities were elevated with a quarter over quarter increase at the end of the year, bringing the total to 219 available spaces in 16 main retail corridors in Manhattan. Average asking rent fell in Q4 to $723/foot, dropping by 8.8 percent. Midtown West had the highest leasing velocity in 2019 with over $450,000 square feet leased across 30 transactions. The Plaza District and Times Square also had high leasing volumes in the fourth quarter.

Bushwick, Inwood, and Two Bridges are just three neighborhoods that are fighting back on developers coming into their communities. In December, a New York State Supreme Court judge annulled the city’s rezoning plan for Inwood. It would have increased the allowable height and density in parts of the neighborhood. This would have included almost 4,000 new apartments where 1,600 were below-market apartments. However, these below-market apartments would still be too expensive for most of the residents. In January, a local city councilman in Bushwick rejected the city’s rezoning plan. The community said the plan was ignoring a community-led plan that would have created apartments that would have been priced better for the residents in the neighborhood. Two Bridges stopped the development of three mixed-use buildings that were ranging from 708 to 1,008 feet tall and only three blocks from one another. The residents of the neighborhood were skeptically of the community benefits, and they hope they can pass their own plan to build new apartments that would be more affordable.

1. 500 E. 30th, Manhattan – the largest building plan filed in January. It is in Kips Bay, and the building will be 21 stories tall and cover approximately 417,734 square feet. It is part of the third phase of the Alexandria Center for Life Science.

2. 2555 Broadway, Manhattan – A 22 story building on the Upper West Side will have 215,866 square feet of residential and 9,080 square feet of commercial. It will have 130 residential units.

3. 1 Ellis Street, Staten Island – A storage facility in Tottenville. It spaces 146,364 square feet, and it will be three stories tall.

4. 88-20 153rd Street, Queens – The largest Queens project, and it’s part of the Mary Immaculate Hospital site in Jamaica. The residential building will be over 132,085 square feet, and it is the fifth building planned for this site.

5. 136-18 Maple Avenue, Queens – The building is over 105,621 square feet, and it is mixed use with 68 apartments and commercial and community space.

6. 134-11 221st Street, Queens – A 72,130 square foot building in Jamaica with residential and industrial space.

7. 35-01 36th Avenue, Queens – The 10-story building in Astoria will span over 43,423 square feet. It is going to be a mix of commercial and community space.

8. 408 Lefferts Avenue, Brooklyn – The biggest Brooklyn project is residential spanning over 43,129 square feet. There will also be community space.

9. 397 Kingsland Avenue, Brooklyn – A 40,000 square foot parking garage is being built by the film and production company Broadway Stages. It will have 150 parking spaces.

10. 17-11 Hancock Street, Queens – In Ridgewood, a 39,673 square foot residential building will be built with 60 apartments.


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