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Weekly Market Report - November 27, 2019

Facebook has now completed a lease at Hudson Yards for over 1.5 million sf across 30 floors and three buildings. Approximately, 1.2 million sf will be in 50 Hudson Yards, 265k sf in 30 Hudson Yards and 57k sf in 55 Hudson Yards. Since Hudson Yards has been built, it continues to be a “magnet for talent, attracting the greatest companies across every sector of the economy”. They are offering employees first-class amenities, food, entertainment, retail, arts and culture right at their doorstep. Thirty Hudson Yards is completely leased, 55 Hudson Yards is 99 percent leased and 50 Hudson Yards is now 75 percent leased. Over eight million sf has been leased or sold at Hudson Yards bringing the overall lease commitments to 91 percent.

Brooklyn is moving out of the second option spot and is now becoming first place for headquarters to many companies. One of Brooklyn’s specialties is that the people who come here understand the below 10,000 sf market. Commercial properties are needed in all neighborhoods, but some are more in demand, including Downtown with MetroTech Center being the main point of the neighborhood. In the past 12 months, rents have stabilized, but North Brooklyn continues to thrive, and it may seem like there will be an oversupply of office space as new construction is expected in 2022. Some big-name companies will take on long-term leases helping the borough continue upward.

The U.S. job market is currently on a hot streak, and to keep that going the most important thing to employers is keeping their workers happy and comfortable. Numerous big corporations are in the transition right now designing new spaces and giving their workers a say in the process. American Airlines has created unique desks that allow more room to spread their legs. There are no more private offices, but more than 1,000 meeting spaces were created in AA, as well as, a lap pool, outdoor meeting areas and cricket pitch. McDonalds Corp. designed a workplace app that lets the employee control the temperature in their specific space. Expedia Group has made their new headquarters in Seattle outdoors friendly. Large sliding glass doors are opened turning the inside office into an outside seating area. Public hike and bike trails are on the border of the area and there is WIFI all along the 40 acres, so employees can work anywhere outside. Walmart is currently building a 350-acre campus, which will house 17,000 employees, 10 buildings, 15 acres of lakes, on-site child care, a gym and a hotel once all done. All of these companies have said that these new designs and additions are “simple human needs that we haven’t been great at in the workplace”. Now, employees can be more productive in an environment that they are comfortable in.

WeWork has announced that they will be cutting around 2,400 jobs following its failed IPO. We Co. has said this past Thursday that these layoffs “are necessary to create a more efficient organization”. This cut is about 17 percent of their workforce as they have about 14,500 employees currently. However, this number does not include the 1,000 cleaning and facility workers that will be transferred to an outside vendor and the 1,000 employees who work at companies that WeWork has acquired but is now trying to sell. These cuts were expected after the company lost $1.25 billion during the third quarter, but they were expected to be earlier, however, WeWork couldn’t afford the severance costs. On Thursday, employees filled a room receiving a quick presentation on the layoffs with their managers and co-CEO’s. After, they dropped off their laptops and keys and left.

Times Square has proved to hold its own against the retail storm that most of Manhattan has gotten swept up in. On average, 360k people walk through the area each day and 65 million visited in 2018 for Broadway shows, the Madame Tussauds wax museum, the M&M store, and more. The five-block area is an inspiration to mall landlords and shopping center owners, which have been trying to lure more people by adding amusement park rides and drag shows. However, Times Square has been a little effected by the retail slowdown. Its availability rate rose to 8.9 percent and asking rents have decreased to $1,820 per square foot, which is 24 percent down from the same quarter five years ago. All over Manhattan retail rents have decreased 32 percent, including on Madison Avenue and Soho’s Broadway. Even with these decreases, Times Square tenants are continuing to sign long-term leases. Mars Inc. leased its M&M store for another 15 years with a 2.5 percent annual rent increase and the Hard Rock Cafe has signed a renewal for 17 years and they are adding an expansion of its shop on Broadway.

New York City is going into its sixth year of a building boom. By the end of 2019, the New York Building Congress anticipates a record-setting $61.5 billion in construction spending, which is more than 103 million sf and over 161k construction workers. But all of this construction is now pushing more focus on the infrastructure. In the city, there is over 6,000 miles of streets and highways, 7,000 miles of water mains, and 7,500 miles of sewer pipes; this is the foundation of NYC. As New Yorkers, we expect reliable commutes, but with 8.4 million residents and growing, the infrastructure is becoming inadequate. Most of the infrastructure is from 1917 to 1950 and underground systems are constantly stressed by commuters, residents and tourists. It would take 175 years to reconstruct all of the city’s roads, update the water mains and more than 400 years to update the sewer lines. To expand priority into this matter, the government can remover statutory and regulatory barriers to public-private partnerships, create competitive programs designed to leverage public dollars and expand the use of private activity bonds. Collaboration between private businesses and the government can result in faster completion. For short-term capital, bonds backed by future revenue could jump-start stalled projects, and the federal government can expand loan programs.

In the Spring, Broad Street Development is set to open 40 Bleecker Street, luxury condominiums and penthouses worth from $2 million to $10 million. Broad Street bought this property as well as 298 and 304 Mulberry Street in 2014 when they saw Noho going through a transformation. From 2014 to 2017, this area stripped many retail stores. Now, most vacant storefronts are filled occupied by health-food markets and small boutiques. Retail rents vary from $225 to $300 per square foot.


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