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In many ways, the COVID-19 pandemic has accelerated transitions that were already occurring in commercial real estate, such as advances in technology and e-commerce, changed spending habits, shifting interests and preferences of younger generations, remote work, and the growing need for health care. As such, adapting and repurposing commercial real estate assets to suit new and different needs will be the core focus for investors, owners and operators in the months and years to come. This shift will require visionary thinking and strategic, opportunistic capital investment. One of these changes is turning commercial into multi-family residential. From an investment standpoint, rent collections and financial performance have been surprisingly strong, making multifamily a resilient and highly desired asset class among investors. The COVID-19 pandemic has driven strong asset prices and dynamic location and technology adaptations among developers and owners.
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Signs of pressure on New York City’s commercial properties are fueling investor bets that trouble in the nation’s largest real-estate market could spread pain nationwide. Although stock markets are near records, assets whose fortunes are more directly tied to New York’s status as a heart of tourism and culture are showing acute sensitivity to the pandemic’s disruptions. Prices for debt backed by hotels and shops have fallen, new loans have slowed, and lenders are more cautious, leaving bankers and the real-estate industry bracing for a hard hit. The pandemic has emptied commercial real estate across the country as Americans stay home, shop online and avoid offices. Many hotels and retail stores have seen a significant drop-off in occupancy, hitting revenue and property values. Appraisals this year on more than 100 struggling buildings with commercial mortgage debt showed property values fell 27% on average, according to a Wells Fargo report. The uncertainty around how a recovery will play out, especially in big cities, has led some investors to bet on further declines.
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Amazon has taken another spot in New York. The e-commerce giant is leasing an additional 975,000 square feet of space at Matrix Global Logistics Park, Matrix Development Group told Crain's on Thursday. The firm will occupy the entire fourth building at the complex. Amazon had leased previously a 450,000-square-foot warehouse and opened an 855,000-square-foot distribution center at the logistics park on Staten Island's west shore. The company also leased a Bronx warehouse spanning more than 100,000 square feet last year. The logistics park is near the Bayonne Bridge and spans 3.5 million square feet overall. Ikea leased a 975,000-square-foot warehouse at the site in 2018 for a fulfillment center focused on e-commerce, and Amazon’s latest deal means the development is now fully leased.
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Lifestyles brands company Centric Brands, which recently emerged from bankruptcy, signed a direct deal to keep its Empire State Building headquarters, Commercial Observer has learned. Centric Brands inked a 10-year lease with Empire State Realty Trust (ESRT) for 212,154 square feet on the entire fourth floor and parts of the fifth and sixth floors of the iconic skyscraper at 350 Fifth Avenue, according to a source with knowledge of the deal and the landlord. Asking rent was in the low to mid $70s per square foot. The company previously subleased about 300,000 square feet in the building from brand management firm Global Brands Group but gave back some of the space on the fifth and sixth floors in the new deal to save money and because it wasn’t using all of it, the source said.