Weekly Market Report - July 1, 2025
- Broker Support
- Jul 2
- 8 min read
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Office demand in the US is recovering after the pandemic, but developers are considering building new office buildings without tenant commitments. Office vacancy in the US reached a record-high 20.4% in Q1 2022, but vacancy in prime buildings is less than 15%. CBRE projects that this rate will be cut nearly in half to 8.2% in two years due to the limited office construction since the pandemic and the demand for top-quality buildings. The best buildings in the best locations have grabbed a majority of tenant demand, with at least 70% of demand in Class-A and trophy buildings across major cities. Developers are expected to deliver just 17 million square feet of new office in the US this year, well below the 10-year average of 44 million square feet.
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650 Madison Ave., a prime Plaza District office building, experienced a nearly 3% drop in net operating income last year, according to Fitch Ratings. The decline was attributed to Ralph Lauren's shrinking corporate headquarters and lower rental rates. The 27-story, 600,000 square-foot property's net operating income fell by nearly 3%, from $50 million in 2019 to $42 million. The reason for the earnings erosion was Ralph Lauren's new rental rate, which was 30% below the existing in-place rent. The building, which is 20%-owned by Vornado Realty Trust and the rest by Oxford Properties, is located at the corner of East 59th Street. Tenants include Sotheby's International Realty, BC Partners, and Willett Advisors, which manages Bloomberg Philanthropies' assets. The building's occupancy rate dropped from 79% the previous year to 97% in early 2020.
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Landlord defaulted on mortgage two months ago
American Strategic Investment Company (ASIC) is facing foreclosure proceedings at 1140 Sixth Avenue in Midtown West, New York. The property, which is 250,000 square feet and has a 26% vacant rate, was acquired from Blackstone in 2016 for $180 million. ASIC defaulted on its mortgage payments in April, leading special servicer LNR Partners to call in the full $99 million loan that matures next year. Issues have been long-running at the property, with ASIC citing financial difficulties of tenants and early lease expirations for breaches of covenants at four properties, including 1140 Sixth Avenue, 9 Times Square, 400 East 67th Street/200 Riverside Boulevard, and 8713 Fifth Avenue. The company owns 1 million square feet in New York City and has just $7 million in cash on hand. A seller mindset has taken over the firm, with CEO Nicholas Schorsch, Jr. spearheading the seller mindset. ASIC has also put 123 William Street, a 550,000-square-foot Financial District office building with a 16% vacancy rate, on the market.
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Zoning plan opened floodgates for landmark buildings, brokers say
City of Yes, a Manhattan rezoning plan, has made air rights deals easier due to new flexibility around transferable development rights. Landmarked buildings can now sell leftover development rights to adjacent lots, which can help them raise cash for repairs and maintenance. In the past half-century, only 15 such deals have closed, and any deal required a lengthy process to get approval from the city. The City of Yes plan significantly expanded which lots could receive the rights, making it more likely to transact if there are 52 potential buyers.
Interest in air rights deals has swelled, with most deals anticipated in Manhattan, which has a high concentration of landmarked buildings. The plan also loosened zoning regulations, such as raising height limits in some parts of the city, encouraging owners to seek out air rights deals. The goal of making air rights transfers easier was to help owners of landmark buildings raise money to maintain them and encourage housing density and development. However, many deals are in the works, and it may take some time for developers to seize upon the new rules and for the owners of landmarked buildings to learn about their new opportunities.
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The Trump Organization has paid off the mortgage on 40 Wall St., a 72-story office tower in New York, free and clear of debt. The Trump Organization paid the roughly $114M balance in cash to wipe out a CMBS loan for the tower, which was set to mature in less than two weeks. The property's occupancy has slipped in recent years, leading the loan covering the property to be watchlisted in February 2023. The Trump Organization never missed a payment on the debt. The property was a quarter vacant at the end of 2024, down from 90% occupied when the debt was issued.
The tower is widely cited as the most valuable piece of the Trump commercial real estate portfolio and its valuation played a key role in Trump's civil fraud conviction in New York. New York Attorney General Letitia James won a $454M judgment against Trump, and a judge ruled in February 2024 that authorities could seize Trump's properties to satisfy the payment. Trump's appeal of the original decision has stalled in court. James has made no secret that she thinks the seizure of 40 Wall would help fulfill the judgment against Trump.
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New York City's real estate industry has been hit hard by the Democratic Socialist state Assemblyman Zohran Mamdani's victory in the Democratic mayoral primary. Mamdani's policies, including freezing rent for 1 million stabilized units, borrowing $70B for affordable housing, and opening government-run grocery stores, have been criticized by Wall Street. The real estate board of New York has urged candidates to focus on data-driven policy analyses and proposals to create housing affordability. The industry's concerns include potential mass exits by businesses and high net worth individuals and the growing gap between voters and business leaders.
The New York City Mayor's election has sparked a wave of interest in real estate, with many expecting a wealth exodus from New York. Developers and investors are predicting a boom in South Florida, with the biggest exodus of New Yorkers since Covid. Mayor Eric Adams is expected to announce his reelection campaign as an independent, and the business community is hoping support will coalesce around one candidate. Business leaders are seeking a candidate with experience to navigate the complex bureaucratic and political machinery in New York City.
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SL Green and its partners are inviting New Yorkers to invest in their proposed casino for Times Square, aiming to "democratize" access to the $4 billion project. Households with as little as $500 to ante up could acquire a sliver of equity in the $4 billion project. The partners hope that by giving the masses a chance to buy into the action, they will win over skeptical lawmakers and secure an edge for their bid when three downstate licenses are awarded next year.
Ryan Williams, a real estate entrepreneur and Blackstone Group alumnus leading the charge to "democratize" access to the Times Square project, believes that by giving the masses a chance to buy into the action, they will win over skeptical lawmakers and secure an edge for their bid when three downstate licenses are awarded next year. If regulators give Times Square the green light, Williams hopes to raise $15 million from average investors. He plans to reach out to them via social media and webinars while tapping into the networks of Jay-Z, whose entertainment firm Roc Nation is a partner in the Times Square casino, and Rev. Al Sharpton, who has given the project his blessing.
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Scholastic Corp. is seeking to sell its headquarters in SoHo's cast-iron district, with the company hiring commercial broker Newmark Group to seek interested parties to acquire adjoining buildings at 555-557 Broadway. The sale proceeds will support capital allocation priorities, including debt reduction and share repurchases. Scholastic's plan to lighten its real estate load is part of a broader streamlining plan, as revenue at the publishing house decreased last year by 7% to $1.6 billion and operating income sank by 85% to $15 million. New leadership has been appointed in its children's publishing and education solutions groups with clear mandates to refine strategies. Scholastic's share price jumped by 10% to $21 a share, and it has lost more than half its value since longtime CEO Dick Robinson passed away four years ago.
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Partners battling over management agreement at 529-key project
Gary Barnett and Joel Wiener are suing Extell Development, the owner of the Diamond District Hotel, for allegedly holding up the hotel's liquor license to extort unwarranted benefits. The suit alleges that Barnett wants to manage the hotel himself under an Extell entity at a fraction of the market-rate cost. Wiener, however, asked for proposals from other management companies and suggested they jointly manage the hotel. After Barnett refused, Wiener held the paperwork for the liquor license "hostage" until Extell gave in to his improper demands.
Barnett is demanding the Wieners to turn over the paperwork and seek unspecified monetary damages. The 33-story hotel, which is slated to open early next year, has multiple restaurants and five bars. Wiener has been struggling financially, filing bankruptcy protection petitions across 82 entities controlling 91 properties and roughly 5,000 multifamily units. In 2018, Wiener joined forces with Extell on the hotel project, which was completed in 2018 after Barnett bought the former site of the Plaza Arcade diamond mini-mall for $40 million.
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JPMorgan and Citibank provided the financing
Brookfield Properties has secured a $400 million refinancing for its Eagle + West project in Greenpoint, Brooklyn. The 745-unit double high-rise, part of Brookfield's "Greenpoint Landing" development, opened for leasing in 2022. The loan replaces a $400 million loan from Blackstone, which closed on June 11. Brookfield bought the site in 2018 with Park Tower Group, which financed the deal with an $89 million loan from the Industrial and Commercial Bank of China. The building, which advertises itself as luxury, has failed to address maintenance issues for its high-flying clientele, with amenities such as a hot tub and a cycling studio being poorly maintained and rarely cleaned. Brookfield, a major investor in New York City real estate, is also involved in several Manhattan deals, including a 49 percent stake in a 15-story office tower and a contract to sell a Soho retail and office property.
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A former vice president at Vornado Realty Trust, Jared Solomon, has been charged with wire fraud and aggravated identity theft by federal prosecutors. Solomon, who worked on leasing digital billboards in Times Square, is accused of stealing up to $9.5 million from the REIT between 2009 and 2023. The indictment alleges Solomon engaged in a scheme to defraud "Victim Company-1" between 2009 and 2023. Solomon initially pleaded not guilty during a hearing but changed attorneys in May, signaling a plea plan. His new lawyers are scheduled to file motions on June 27. Prosecutors claim Solomon bought a Westchester home and a Manhattan co-op apartment for nearly $4.6 million. U.S. Attorney Damian Williams, who resigned before Donald Trump took office, has asked the court to force Solomon to forfeit the properties and cash in his bank account if he is found guilty. Solomon was released on bail for $250K. Vornado did not respond to Bisnow's request for comment by press time.
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