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Weekly Market Report - March 20, 2022

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New York office occupancy nears pandemic-era high


As of last week, just under 37% of employees who would've been at the office pre-pandemic were back each day on average over the course of the week. That's the second-highest figure since the pandemic hit the city. Since early 2020, Kastle has been analyzing keycard, fob and its KastlePresence app access data from the 2,600 buildings and 41,000 businesses it secures in 47 states to see what's happening with office occupancy rates in different metro areas.


New York City's office occupancy rate had reached a pandemic-era high of 37% the week of Dec. 1, just as the Omicron variant hit the city and more people began working remotely again. The week of Dec. 29, the occupancy rate was 10.6%. Since then, the figure has been slowly but steadily climbing back to where it was before the holidays. With Covid-19 rates back down again both nationwide and in New York City, Ein said it's clear more people are getting out and about again. More people appear to be commuting via public transit, too.


Over the past week, subway ridership has been above 3 million each weekday, according to the Metropolitan Transportation Authority. Before the pandemic, average weekday ridership for the subway was frequently above 5.5 million. That figure hit a low of 300,000 daily trips in April 2020, according to the MTA.


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NYC’s 20 largest commercial deals of 2021


The city’s biggest single-property commercial sales of last year included the priciest deal since 2019, an observation deck, a bankrupt Brooklyn development and some deeply discounted hotels. Among sales of individual commercial properties or commercial condos, the largest last year was CommonWealth Partners’ $1 billion purchase of Hudson Commons, a 25-story office and retail building at 441 Ninth Avenue in Hudson Yards. It was the first investment sale in the city to top $1 billion since 2019. Hudson Yards dominated the list of 2021’s biggest commercial deals. The area notched three of the top 20, including No. 4, KKR’s $500 million purchase of The Edge observation deck atop 30 Hudson Yards, and No. 14, Sam Chang’s $166 million sale of a hotel at 350 West 39th Street. The second largest was the sale of the tower at 100 Pearl Street — previously known as 7 Hanover Square — by the Gural family’s GFP Real Estate and the Northwind Group to German investor Commerz Real.


Originally reported as a $850 million deal, city records confirm the final price tag was $756 million. Though most of the biggest sales were in Manhattan, the third largest was in Brooklyn: the bankruptcy sale of All Year’s Denizen Bushwick. Atlas Capital Group picked up the massive development on the site of the old Rheingold Brewery for $547 million. SL Green’s $290 million sale of a 25.5 percent interest in One Madison Avenue in Flatiron rounded out the top five. That office building just landed IBM as an anchor tenant.


Brooklyn actually had two deals in the top 10. The other was the $220 million sale of the rental portion of Front & York at 160 Front Street — a.k.a. 85 Jay Street — to Scott Rechler’s RXR. Two other outer boroughs made the top 20. The $166 million purchase of studio facilities at 36-06 34th Street in Queens — No. 15 in the ranking — was part of Hackman Capital Partners and Square Mile Capital Management’s acquisition of Kaufman Astoria Studios.


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Coworking Giant in Venture to Create the Airbnb of Office Space


Entrepreneurs have long sought to create a big online listing site for office space similar to how Booking.com or Airbnb offer lodging options. Now the Covid-19 pandemic is breathing new life into these efforts. Flexible-office operator IWG PLC. said last week that it is investing around $350 million into a venture with the Instant Group, which runs an online listing site for office space. The companies say the business will be the world’s largest online marketplace for flexible office space.


The move comes as demand for furnished office space under short-term leases is gradually recovering from its pandemic low. As more companies send their employees back to the office, many are embracing hybrid-work schedules. That is increasing demand for offices and meeting rooms that can be booked by the day or by the hour. IWG and Instant Group are betting that this, in turn, creates the need for an online marketplace to easily find and book these spaces. IWG, based in Switzerland, operates more than 3,000 office spaces across the globe under brands like Regus and Spaces.


Under the deal, IWG merged its digital offerings with the Instant Group, which aside from the marketplace also offers services like office management and consulting. IWG owns 85% of the combined company and Instant Group’s management holds the remaining 15%, Mr. Dixon said. While a number of listing sites for office space exist, none has so far managed to emulate the success of Airbnb or Booking.com. Flexible spaces grew in the years before the pandemic, but they are still a small part of the office sector and the more common long-term leases still depend on brokers. That has limited how much business online marketplaces can do.


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Massive Rockefeller Center retail block hits the market


A 65,000-square-foot site at 1221 Sixth Ave. Rockefeller Center is up for grabs now that the previous tenants, the formerly bankrupt New York Sports Clubs and Cafe Metro, are no longer leasing there, the Rockefeller Group announced Thursday. The fitness chain’s lease was terminated as part of Chapter 11 proceedings during the pandemic following a September 2020 bid for bankruptcy protection.


The company closed several of its city locations, including the lower-level gym near Rockefeller Center. The company is completing a $50 Million renovation of the center’s public’s spaces. The group is mainly targeting companies that specialize in health and wellness, brand experiences, and technology and gaming. Rents across the block of space are $80 per square foot.