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Weekly Market Report - June 22, 2022


Manhattan landlords in 2022 are facing the challenge of attracting workers back to the office. In a world where flexibility has become the norm, convincing people that it’s still worth coming to the office is no easy task, especially in a high-density, high-traffic urban center such as Manhattan. These big, crowded cities have lost some of their appeal in the wake of the pandemic due to safety concerns, disrupted public transit, expensive housing, and aging infrastructure. Many people have moved away from big urban cores and embraced new opportunities brought about by remote and hybrid work, leaving behind empty office buildings. The challenge of bringing people back to the office is much more complex in the post-pandemic, remote-centric world. With so many companies offering remote work opportunities, landlords need to get inventive and keep an open mind if they want to lure workers back to their desks. The office now has to compete with the home office, and that’s a tough competition.

So, what can landlords do about it? It’s all about the target audience, as it were. If employers want to appeal to young workers in the Gen-Z or Millennial generation, they need to provide entertainment and activity in the office. This can include bars, outdoor space, on-site cafes or restaurants, game rooms, fitness centers or yoga spaces, and so on – essentially encouraging socialization and communication with their peers, as well as physical and mental wellbeing. They also need to incorporate modern technology, such as touchless access, face recognition software, and other ‘smart’ building features, such as lighting and temperature sensors, state-of-the-art HVAC, and energy-efficient amenities.

Younger generations are all about technology, sustainability, and wellbeing, so incorporating these three things into the office can make a big difference and give landlords an advantage. But landlords need to also appeal to workers that find it too distracting to work from home, and who need the office to be a place of concentration, focus, quiet, and productivity. The challenge lies in balancing these two sides and providing both collaboration and entertainment for those who wish it, as well as private spaces for deep, focused, uninterrupted work.


Imagine what you could do with a three-day weekend. You could finally catch up on your sleep, get to the museum for that show you've been wanting to see, have another day to brunch with friends, and actually not spend your whole weekend just doing chores and errands. A four-day workweek would be a game-changer. Well, a four-day work week program is officially underway in the U.S. and Canada—38 companies started their new schedules on April 1 and will work four-day weeks for six months as a test to see if the international results can be duplicated.

In 2019, Microsoft Japan tried it and reported a 40 percent jump in productivity with the program—along with an associated guideline that no meeting can go over 30 minutes.These companies are being asked to do the same amount of work as before, and for up to 35 hours per week, but this will be split over four days not five. They will also be paid the same as before. And while making a four-day workweek more widespread seems like a long shot given American work culture, the pandemic really changed things, according to New York Governor Kathy Hochul and NYC Mayor Eric Adams. Both of them have admitted the five-day workweek may be a thing of the past. Those of us who have worked from home these past two years have gotten used to the convenience and comfort of working from home. There's no awful commute and we don't have to put up with an uncomfortable office culture. And with a rise in subway crime as of late, people feel safer working from home.

According to reports, only 35 percent of NYC's workers have returned to the office full time. That being said, Hochul said she'd like to see people go into the office "at least three to four days at minimum" to spur economic recovery, creativity and social development. Even more unbelievably, Mayor Eric Adams seemed to reverse his stance on getting New Yorkers back to the office. He said this week that we're "moving into a new era of working and what New York is going to look like,"


The real estate industry did not perform equally throughout the pandemic, with sectors such as industrial and multifamily buoyed by high demand while office and retail languished during lockdowns and beyond. But the factors bringing the stock market down, notably inflation and the rising interest rates it triggered, are now affecting the real estate market as a whole. On top of that, pandemic-era conditions that favored the residential and industrial sectors have been tapering since the beginning of this year.

Industrial and multifamily stocks have come down sharply since peaking in December. Share prices of Prologis and Lennar, indicators for the industrial and multifamily sectors, respectively, have dropped 50 to 60 percent. On a longer timeline, proptech brokerage platforms have fallen the farthest since an earlier pandemic peak. Redfin stock has been declining steadily since early last year and dropped by 70 percent from its peak in February 2021. And the pandemic losers, office and retail, are now further from pre-Covid levels than ever. SL Green is down 30 percent from June 2021 and 70 percent from its five-year peak in August 2018. The implications of these downward trends are only starting to manifest. Some proptech platforms have begun shedding staff, and Redfin and Compass announced layoffs this week. A slumping stock price raises a company’s cost of capital, making it harder to acquire other companies, hire workers and retain the ones they have.


Top Rock revealed as buyer of former Fifth Ave WeWork for $100M

Uri Mermelstein’s Top Rock Holdings was the buyer of the office portion of 609 Fifth Avenue, a person familiar with the matter, and that the developer plans to build residential condos there. SL Green announced last week that it had sold the property, but referred to the buyer only as a “domestic investor” whose plans were not disclosed.The office portion of the building has been sitting empty since WeWork vacated its lease last year. The building’s retail space is anchored by Puma.Top Rock, along with its partner RJ Capital Holdings, plans to bring on a luxury brand to build condos with the goal of attracting wealthy buyers. Valley National Bancorp provided about $80 million in financing for the acquisition. SL Green acquired the building from Wharton Properties before splitting the 168,000-square-foot property into retail and offices. It repositioned the building after dollmaker American Girl left for 75 Rockefeller Plaza and offered its office tenants buyouts.The 29,000-square-foot retail portion was subsequently leased to Puma in 2018.

WeWork leased the entire 139,000-square-foot office portion the same year. By 2020, SL Green was looking to sell the property, apparently to reduce its exposure to WeWork. The Reuben Brothers picked up the building’s retail portion for $168 million, while WeWork terminated its lease last year, leaving the office portion to sit empty. Led by Mermelstein and Joseph Yushuvayev, Top Rock Holdings, along with SYU Properties and RJ Capital, is also seeking to redevelop the former Parkway Hospital in Forest Hills, Queens. The group paid $31.7 million for the property last year.


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