This Week in Real Estate - 12/1/17
New Age Perks for Millennial Tenants
Employers today are striving more and more to create an office environment that is collaborative, spacious and fun in order to entice millennial tenants. Common features of the contemporary workplace include open floor plans, high ceilings and ping pong tables. Tishman Speyer, one of the city’s largest commercial landlords, implemented a program earlier this year called Zo, which provides a dedicated space and menu of services at its properties geared toward enhancing tenant wellness. Features of this program include an onsite nurse practitioner and private rooms for yoga and meditation. Many other landlords are expected to follow suit, as younger workers will be increasingly concerned with the healthful qualities of their workspace.
Red Hook Commercial Real Estate
The commercial real estate market in Red Hook, Brooklyn might be getting hotter and hotter, but when it comes to attracting tenants, it’s not quite there yet. However, bright spots are beginning to emerge. Tesla Motors leases 46,500 square feet on the ground floor of a warehouse at 160 Van Brunt St., with Milan-based Princi, a division of Starbucks, about to open an 18,000-square- foot bakery café on the ground floor. Rents in the 98,650-square- foot building are in the $40 per square foot range. While still not in the range of Dumbo or Downtown Brooklyn, Red Hook rents are starting to creep up. The main downside of Red Hook is the fact that it’s far away and amenities are few. The nearest subway is 1.5 miles away and there is only one bus line.
Lower Manhattan Vacancy Hits New Low
Lower Manhattan is currently the strongest commercial leasing market in New York City. The neighborhood experienced its highest year-to- date leasing activity since 2014, led by major lease deals by Macmillan Publishers, ESPN Studios, and the Stagwell Group. Vacancy rates for the area’s commercial space have dropped to 8.7%, the third consecutive quarter the number decreased, and the lowest it’s been since 2014. Since last quarter, leasing activity shot up 20% in Lower Manhattan, with the area logging 1.43 million square feet of new activity in the third quarter. That number brings the total leasing volume to 4.5 million square feet so far this year. While leasing activity is up year-over-year in all of Manhattan as a whole, Lower Manhattan’s 56% jump year-over-year is the highest increase among other submarkets, by a long shot. In Midtown, activity is up 20% year-over- year, led by strong leasing activity at Hudson Yards, while Midtown South’s leasing activity is up only 8% year-over- year.
City Recycling Crackdown
The Department of Sanitation is cracking down on landlords amid the recent implementation of commercial-property recycling regulations. The rules require all buildings to segregate recyclable paper refuse from metal, glass and plastic containers as well as from disposable materials such as plastic bags and Styrofoam. If at least 10% of a building's trash consists of textiles and food waste, the owner also will be responsible for filtering out that material and arranging for its proper removal. Commercial landlords must designate containers for each of the different varieties of waste and inform tenants, building staff and their private carting service on how to use them. Failure to comply results in fines beginning at $100 per violation for first-time offenders and swell to $400 apiece for a third strike.
Retail Vacancies in SoHo
Investors who spent more than $940 million to buy retail-focused buildings and condominium and cooperative units in SoHo over the past six years are today sitting with their spaces vacant. As the retail market struggles citywide, landlords are under pressure to occupy the space, even if they’re not able to achieve the rent they anticipated when they closed the sale. Soho saw average asking rents double from 2008 to 2014, hitting $890 per square foot that year. While those numbers have declined, reaching $812 in May, many tenants still aren’t signing up. If they are, it’s for short-term deals as they struggle with an unpredictable economy and the rise of online retail.
This news update is brought to you by David Reich, a New York-based Corporate Real Estate Advisor whose team has over 40 years of experience representing tenants in New York City for all their office space needs. To learn more, visit www.leaseofficesnyc.com