Weekly Market Report - June 25, 2026
- 3 hours ago
- 9 min read
***
Two significant leases have been signed at a Midtown South office tower, 2 Park Ave. Via Transportation will occupy approximately 55,100 square feet on the 25th and 26th floors, moving from a smaller location at 114 Fifth Ave. The duration of this lease is unspecified. Meanwhile, AI company Cadent has secured around 50,000 square feet on the ninth floor, with its lease duration also unclear. Office rents at 2 Park Ave. range from $95 to $115 per square foot.
The building, purchased by Hadson Realty for $357 million in December 2024, is experiencing heightened interest from tenants due to its quality space and amenities. In addition to Via and Cadent, behavioral healthcare provider Charlie Health, CUNY, and Oxford Economics have recently signed leases, leading to a 90% occupancy rate. Brokers involved include Savills, Newmark, and JLL, though some could not be reached for comments before press time.
***
Midtown’s prominent property owner, Williams Equities, faces challenges with its prewar office building, 79 Madison Ave., which was recently transferred to special servicing after a sale fell through. The building, occupying 250,000 square feet, is nearly 60% vacant and is expected to reach 90% vacancy next month when a significant WeWork lease expires. The $85 million debt associated with the property came due in January. Williams, a family-run firm established in 1926, has owned 79 Madison since 1981 and manages about 4 million square feet of commercial space. The issues with 79 Madison reflect broader struggles for prewar office buildings in Manhattan post-pandemic, as overall office vacancy remains around 20%.
New York's return-to-office rate is stagnant, with current occupancy at 58%. Last year, 79 Madison was listed for $130 million, a reduced price from its previous valuation, yet still higher than comparable properties. Conversion to residential use is being considered but would require substantial investment. While the building features unique architectural elements, its location contributes to its challenges, being less accessible to major commuting hubs, leading to higher vacancy in similar buildings.
***
A Manhattan property owner, APF Properties, faces significant challenges with their 286 Madison Ave. building, a 130,000-square-foot prewar tower near Grand Central Terminal. The building's $60 million mortgage has been transferred to special servicing, indicating financial difficulties, and the owner seeks a loan modification as the mortgage matures on August 6. Despite its prime location, the tower’s vacancy rate has surged to 21%, with net operating income plummeting by 30% to $3.6 million.
Major deferred maintenance issues have been reported, including peeling paint and water pooling. APF, co-owned by Kenneth Aschendorf and Berndt Perl, has faced troubles since the pandemic, including losing two other buildings to foreclosure. While Manhattan boasts a robust office market, particularly north of Grand Central, many older Class B buildings like 286 Madison are struggling to recover, contributing to a persistent 20% office vacancy rate across the borough, unlike newer towers that are filling up quickly.
***
In February, news emerged that Dajia Insurance Group, the Chinese government-controlled owner of the Waldorf Astoria, plans to sell the hotel portion just months after its reopening following an extensive renovation that cost approximately $2 billion. Originally established in 1931, the hotel underwent eight years of renovations, converting it into 375 luxury rooms and 372 condos while preserving its opulent public spaces. The anticipated sale price exceeds $1 billion, though industry experts doubt it will recoup the total redevelopment costs. The Waldorf’s potential sale may serve as a significant indicator of New York's post-pandemic hotel market, with expectations that it could achieve a historic sale price in the city.
Investors have shown growing interest in high-end hotels in New York, highlighted by recent acquisitions of prominent properties by Miami-based Gencom. However, the Waldorf's condo sales are progressing more slowly than expected, adding complexity to the sale's economics. Limited financial history since the reopening could deter potential investors. Additional uncertainties arise from geopolitical tensions and rising operational costs in New York, including significant wage increases for hotel workers. The market's response to the Waldorf will provide insights into the recovery of luxury hotel investments in New York City. A discounted sale would reflect broader financial challenges, while a record-setting price could reinstate confidence among investors.
***
YIMBY reported on ten office-to-residential conversions in Manhattan, transforming underutilized properties into nearly 3,000 housing units across various neighborhoods. Notable projects include 101 Franklin Street in Tribeca, a vertical expansion adding four floors for 72 condos and retail space, designed by Steven Harris Architects and developed by Skylight Real Estate Partners and others. The project features a redesigned ground level and new terraced upper levels. Sales will be managed by Corcoran Sunshine Marketing Group. Also progressing is 77 Water Street in the Financial District, a 26-story tower being expanded with seven floors for 647 rental units by CetraRuddy Architecture and Vanbarton Group. The design includes large cutouts for open-air spaces and amenities like a spa and golf simulator, expected to complete by spring 2027.
***
Blackstone anticipates a recovery in the commercial real estate market, particularly in multifamily rentals, leading to significant investments despite a cautious approach due to uncertain interest rate cuts. Blackstone President Jon Gray stated that the firm is not waiting for a definitive “all-clear” to invest. In Q1, Blackstone deployed nearly $25B, exceeding its Q1 2023 investments, although this marked a 21% decrease from Q4 2023. The firm believes that commercial real estate values are nearing their lowest point, prompting increased transactions, including a $10B acquisition of Apartment Income REIT Corp.
Rental housing remains a primary investment area due to a supply-demand imbalance, with Gray noting that current housing starts resemble those of the 1960s despite a larger population. However, the prolonged high-interest rate environment is affecting deployment strategies. Repurchase requests in Blackstone’s BREIT have significantly declined, with executives confident in its recovery. Blackstone’s net income for Q1 stood at $847.4M, substantially higher than the previous year's earnings.
***
Yellowstone Real Estate Investments secured $480M from Madison Realty Capital for the office-to-residential conversion of 1740 Broadway, a 27-story tower formerly called the Mutual of New York Building, located near Columbus Circle. The building will be transformed into 420 luxury residences, with 238 rental units on floors three to thirteen and 182 condominiums from floors fourteen to twenty-seven. Additionally, over 60K SF will be dedicated to amenities, including a coworking lounge, private club, pet area, and spa with a lap pool, alongside a 22K SF fitness center. The original bank vault will house a speakeasy bar. The property retains 18K SF of retail space. CEO Issac Hera aims to combine the building’s history with modern design, following a strategic acquisition of the tower's debt in 2024.
***
A Midtown office tower, 1740 Broadway, is set to be converted into a luxury residential building, with Yellowstone Real Estate Investments securing a $480 million loan from Madison Realty Capital for the redevelopment. The 27-story structure will feature 420 multifamily units—238 rental units on floors three to thirteen and 182 condominiums on floors fourteen to twenty-seven. The tower will also include over 60,000 square feet of amenities, such as a sporting club, spa, speakeasy bar, and lounge. Ground-floor retail will encompass approximately 18,000 square feet, housing tenants like Sugarfish and Sweetgreen, which will remain open during construction. The anticipated completion is in the third quarter of 2029. Yellowstone acquired the building for $186 million from Blackstone two years ago, which previously bought it for over $600 million. Madison Realty Capital has a history of financing prominent projects in Manhattan, including another significant office-to-residential conversion last year.
***
Morgan Stanley is looking to invest $684 million in a new high-rise office tower at 2401 McKinney Ave. in Uptown Dallas, leveraging the growing significance of the region as a financial hub. The firm is seeking an $18.5 million incentive package from the city to initiate the project, which would involve a total construction cost of approximately $650 million. Morgan Stanley plans to lease around 700,000 square feet for 16 years starting in 2031, accommodating 3,800 employees by 2035.
During the construction period, the company intends to lease 255,000 square feet in Fountain Place for 1,500 employees until 2031, while also evaluating Alpharetta, Georgia as an alternative location. The Dallas City Council is set to review the incentive package, which may include tax abatements. The proposed tower is to be completed amidst Dallas’ shifting office landscape, as companies like AT&T and the Dallas Mavericks have announced moves out of the city, highlighting the need for more office space in the central business district.
***
Pimco Prime Real Estate aims to grow its real estate presence while minimizing environmental impact. The $85 billion division of Allianz Group plans to acquire and renovate properties in areas less affected by climate change, as Chief Sustainability Officer Raphael Mertens indicated. Despite federal rollbacks, local policies, like New York City's Local Law 97, enhance investment appeal by promoting green practices. Major cities like New York, Paris, Munich, and Sydney have invested in climate-risk measures, attracting Pimco's interest. Property insurers have raised premiums in high-risk U.S. areas, leading to potential property value declines of $1.5 trillion over 30 years. Pimco avoids properties lacking insurance, emphasizing awareness of climate risks even in currently safe locations. The company evaluates property sales case-by-case based on market changes and client needs.
***
BXP has secured a significant lease with McDermott Will & Schulte for 150K SF at the new Madison Avenue office tower at 343 Madison Ave., covering floors 31 through 37. The law firm, among the largest in the U.S. by revenue, plans to occupy the space, featuring over 330 offices and an outdoor terrace, by October 2029. This lease comes after BXP's earlier deal with Starr for 275K SF in the same building. Additionally, McDermott is enlarging its footprint at One Vanderbilt, expanding from 146K SF to create 175 new offices by next June. This initiative follows McDermott Will & Emery's acquisition of Schulte Roth & Zabel. McDermott's Chairman, Ira Coleman, emphasized New York's importance for high-end legal work. The firm also initiated construction for a 150K SF office in Washington, D.C.
***
Manhattan's office leasing market is booming, with a noteworthy focus on a prime space at 9 West 57th Street, where Stefan Soloviev is targeting an unprecedented rent of $400 per square foot for an 11,155-square-foot area. This would exceed the previously set record of $327.50 earlier this year. Soloviev, who inherited the building from his selective father, Sheldon Solow, is modernizing the property and introducing a new 20,000-square-foot amenity floor with Central Park views to attract tenants. Recently, the tower secured leases in the $300 range, including a $315 per square foot lease by Webster, signaling a new trend in high rents.
Although rents above $300 a foot have historically been rare, the market is shifting, with an increase in deals surpassing previous barriers of $100 and $200. In 2025, New York saw a record 313 leases starting at $100 per square foot or more. Soloviev mentioned signing five deals at 9 West 57th Street in the $200 range, further exemplifying the market's rise. Overall, Manhattan recorded 12.78 million square feet leased through May, in line with last year, with average asking rents rising nearly 6% year-over-year to $86.55 per square foot.
***
TF Cornerstone is developing an 890,000-square-foot waterfront project in Greenpoint, incorporating shoreline stabilization features to mitigate climate-related erosion and flooding. The development at 2 Noble St. will consist of approximately 1,060 apartments, retail space, and a 31,275-square-foot public waterfront area along the East River. This initiative aligns with a trend in New York's waterfront developments to prioritize climate adaptation, learned from past disasters like Hurricane Sandy. Following previous flooding issues at its Long Island City site, TF Cornerstone emphasizes engineering solutions for waterfront land to enhance resilience.
The vacant 174,000-square-foot site was previously home to the American Manufacturing Company factory, destroyed in 2006. The public access area will include coastal vegetation, recreational amenities, and increased permeable surfaces, contributing to shoreline stability. Experts note that repositioning critical building systems above ground and investing in improved flood protection has become essential since Sandy. Developers are now more aware of longer-term climate risks, even for inland properties. The Waterfront Alliance promotes higher standards for waterfront design through its WEDG certification program, aiming for resilience and ecological soundness while enhancing public access, shaping the future of urban waterfront development.
Comments