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Weekly Market Report - May 20, 2025

  • Writer: Broker Support
    Broker Support
  • 24 hours ago
  • 13 min read

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Black commercial real estate executives are unwavering in their efforts to increase diversity, equity, and inclusion (DEI) in the real estate industry. Despite the backlash against corporate diversity initiatives, many executives, developers, contractors, and students of color have continued to push for greater diversity and inclusion in the industry. The event, Flipping The Hood, was attended by over 300 people and focused on overcoming obstacles that have held back communities of color in the US for over a century. Executives at the event emphasized the importance of investing in areas that people have overlooked, and that the most successful investments are those that yield high returns and profits. Despite the challenges posed by cuts to housing programs and grant funding, many financial institutions are still investing in communities of color, recognizing the potential for growth and success.


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Bank OZK wants to diversify after long defending ultrahigh concentrations of commercial real estate


Bank OZK, an Arkansas bank that financed skyscrapers, is reducing its focus on commercial real estate due to higher rates and remote work. The bank's heavy concentrations of construction and development loans have been criticized by Wall Street, but it is now focusing on reducing its reliance on construction and development loans. The bank's real-estate specialties group made up less than two-thirds of its total loans in the first quarter, with a cap of $500 million on new loans. The bank's strategy of going after giant, complex commercial real-estate loans has drawn skepticism from the industry and regulators. Commercial real-estate loans are lingering on the bank's balance sheet longer, with less refinancing activity in the market. The bank's stock has been downgraded by Citigroup, and short interest in the bank has risen sharply to 16.5% of float.


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An unidentified buyer is set to acquire an 11-story office building near the High Line for $205 million, indicating a strengthening market for office towers. The building, 512 W. 22nd St., is valued at $1,184 per square foot, slightly higher than the $1,127 per square foot paid last year for 625 Madison Ave. by Related Cos., which plans to build a condominium tower on the site. Older office towers have sold for $400 a square foot or less in the past year. Developed in 2018 by Vornado Realty Trust and Albanese Organization, the 173,000 square-foot building is 100% occupied with average office rents of $115 per square foot. Proceeds from the sale will partially repay a $124 million mortgage due next month.


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A prominent downtown storefront, 170 Broadway, has gone to foreclosure after Crown Acquisitions and Morgan Stanley defaulted on its $64 million mortgage. The retail space, occupied since 2015 by the Gap, has had a contentious relationship with its landlords since they forced the big national chain to keep paying rent after the store was compelled to close temporarily in March 2020. Gap sued to terminate its lease but a judge ordered the tenant to pay up. The lease at the corner of Maiden Lane continues until 2030, and the California-based company did not immediately respond to an email asking if it would consider renewing should a new property owner emerge in foreclosure proceedings.


The case was filed last week by Deutsche Bank, which represents investors in the mortgage that came due on April 6. Crown's vast real estate holdings, controlled by the Chera family, own or manage 10 million square feet of space, including the office building at 650 Madison Ave. and the luxury apartment and retail building at 645 Fifth Ave. Crown and Vornado Realty Trust agreed to pay down a portion of the mortgage, and lenders wrote a new $355 million loan due next month.


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Westside Market, a neighborhood supermarket chain, has purchased a large retail space at 2250 Broadway on the Upper West Side for $32.5 million. The commercial condo, which was previously home to an RKO vaudeville theater, now houses a Staples and has previously housed home goods and clothing stores. Westside Market has seven existing locations in Manhattan, with a new location at 2171 Broadway closing in 2017. The company leases at several locations, but it is unclear whether it has ever purchased a site. The founder of Westside Market, Ioannis "John" Zoitas, signed the deed for the buyer, officially Westside 2250 Broadway LLC. The chain has been known for its quality produce, neighborhood feel, and prepared foods. It is unclear whether Westside Market plans to open another location in the newly purchased site. TPG Angelo Gordon bought the site in 2022 for $27 million.


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Old Navy, Gap Inc.'s largest brand, has secured a 55,000-square-foot flagship store in Herald Square, the top retail lease in New York City this year, according to Newmark Group. The store will be two floors long and open next year, closing its 150 West 34th Street location. The new location will enable Old Navy to deliver a fresh, immersive, digitally led experience. The brand is looking to modernize its customer experience. Despite the pandemic impacting Manhattan's retail tenants, the city's shopping corridors have started to recover, with luxury brands buying properties along Fifth Avenue and major brands like Ikea announcing plans for new retail spots.


Apparel companies were the second-most active sector for leasing Manhattan retail space during the first three months of the year, leasing over 148,000 square feet. Gap has been updating its stores under CEO Richard Dickson, who became CEO in August 2023. The brand recently reopened a store in the Flatiron district and renovated its flagship in Soho. Gap reported strong quarterly sales in its most recent earnings report in March


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Office developer BXP CEO Owen Thomas is working on building a 46-story tower at 343 Madison Ave., which would offer direct access to Grand Central Terminal and its 750,000 daily visitors. However, the problem is paying for it, as the cost of a Midtown tower has grown to $2,000 per square foot due to soaring steel and other commodity prices. This is 66% more than JPMorgan paid for its near-completed tower at 270 Park Ave. Thomas teamed up with Norway's $1.7 trillion sovereign wealth fund to develop 343 Madison, insisting that work will begin this year. BXP officials have said rents of $225 per square foot will be needed for the math to work at 343 Madison, a price only a few Manhattan floors command.


Real estate experts believe 343 Madison could achieve those rents due to its location, just a five-minute walk from the Grand Central clock. BXP has made lease proposals to seven potential anchor tenants and another 10 are considering the building. On Monday, 343 Madison's backers received encouraging news when the U.S. and China agreed to a 90-day truce on their tariff war. BXP shares rose by 4%, and copper prices fell for BXP shares, though the industrial metal remains 25% higher than 12 months ago. BXP president Douglas Linde will make his case that 343 Madison will be worth waiting for in an interview with Bank of Montreal real estate analyst John Kim.


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Vanbarton Group, a developer in New York City, is planning to create 420 apartments at 1011 First Ave., the former headquarters of the Archdiocese of New York. The filing, submitted to the city's Department of Buildings, also calls for extending the structure's height by 6 stories and renaming it 1005 First Ave. The company has been in contract to buy the 1973 building for $100 million since early 2024, but the deal has not yet closed. The Archdiocese plans to relocate to a new home in leased space at 488 Madison Ave., an office building across from St. Patrick's Cathedral. Before the building, the property was home to the historic St. John the Evangelist church, which was razed in the early 1970s. Vanbarton Group has previously converted Nos. 160 and 180 Water St. into housing and filed plans to turn 77 Water St. into a 651-unit apartment tower. Midtown East has emerged as a new hotbed for office conversions, with the conversion of the former Pfizer complex on East 42nd Street being a major case in point.


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Saint Ann's School in Brooklyn Heights has purchased a new building for $16 million, expanding its pre-K-12 private learning institution's footprint. The school, which currently has seven buildings in the neighborhood, leased the building from Jonathan Rose Cos., which acquired the lot in 2015 for $36.5 million. The renovation of the site began in summer 2024 and is still ongoing. The 25,000-square-foot building will serve as the kindergarten, with a rooftop play space designed by toymaker Cas Holman. The school plans to add four classrooms for older students, a science lab for elementary students, and art, community, and dance spaces.


The school had been searching for a site for a decade and launched a $30 million fundraising campaign to support the acquisition and renovation. Saint Ann's enrollment has grown slightly in the past two decades, from 1,010 non-pre-K students in the 2003 academic year to 1,042 in 2021. The school is among the local private schools with a more liberal reputation, with teachers opting for narrative reports of progress and no AP or honors classes. Nearly every graduating senior attends a selective college. Notable alumni include Jean-Michel Basquiat, Lena Dunham, and Zac Posen.


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Bayview Asset Management grabs portfolio of 121 commercial loans


Blackstone has successfully cut off more of its commercial debt inherited from Signature Bank for the third time, with Bayview Asset Management purchasing a portfolio of loans from the Blackstone-led venture for a slight discount. The joint venture of Blackstone, Rialto Capital, and the Canada Pension Plan Investment Board began marketing $395 million worth of commercial property loans in the tri-state area in March. The portfolio includes 121 loans backed by office, multifamily, retail, and industrial properties, mostly in New York City.


Morgan Stanley bought $700 million worth of loans from the trio last year. Maverick Real Estate Partners purchased $247 million in debt, backed by eight properties. In December 2023, Blackstone Real Estate Debt Strategies, BREIT, Rialto Capital, and Canada Pension Plan Investment Board landed a 20% stake in a venture holding Signature's $17 billion commercial real estate loan book with a winning bid of $1.2 billion. The FDIC kept an 80% interest and provided financing equal to 50% of the venture's value.


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Servicer alleges default on Signature Bank loan for Chinatown office building


Rialto Capital is suing another Signature Bank borrower, Jeff Krasnoff's firm, for defaulting on a $21 million loan tied to a Chinatown office building owned by the Gluck family's Stellar Management and Michael Alvandi's City Urban Realty. The landlord defaulted in June on the loan, which was guaranteed by Larry Gluck and Alvandi. Rialto, the loan servicer for the joint venture that holds Signature Bank's non-rent-regulated commercial real estate loans, has been relentlessly pursuing defaults on property owners who secured loans from the failed bank. One borrower, Midtown Equities' Joseph Cayre, fought back, filing to foreclose on a Brooklyn Heights property in February. Midtown Equities alleged Rialto maliciously schemed to engineer a default, and the company filed a class-action lawsuit against Rialto. City Urban and Stellar bought the building in 2016 for $25 million from the estate of the late Sau Tchu Luu Fan. Blackstone Group notified the borrowers in August that the loan was in default, but the principal and interest remained unpaid as of May 1.


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Digital sports platform adding to growing Manhattan footprint


Sports entrepreneur Michael Rubin has signed a lease for 54,000 square feet at a joint venture of Hines, Trinity Church Wall Street, and Norges Bank Investment Management in Manhattan. Fanatics, a digital sports platform, has offices in San Mateo, Tampa, the United Kingdom, India, and Japan. The 17-story, 980,000-square-foot property at 345 Hudson Street is currently in a transitional phase, with Google trying to sublease 165,000 square feet as it consolidates around St. John's Terminal. Prior to the Fanatics deal, more than 400,000 square feet was available at 345 Hudson Street. The average asking rent in Hudson Square and the Meatpacking District in the first quarter was $86.70 per square foot. In April, tenants signed deals for 3.38 million square feet in Manhattan, a 23% increase year over year. Leasing volume declined from the previous month, but the borough's availability rate dropped to 15.7%, the lowest since February 2021.


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Bankruptcies, tariffs, uncertainty upending the sector


The retail sector's recovery from the pandemic may be hindered by factors such as store bankruptcies, consumer pullback, and tariffs. In Q1, net occupancy in the sector declined by approximately 6 million square feet, marking the weakest quarter since the pandemic began. Retailers are retreating, with 1,300 more stores closed than opened last year. Major bankruptcies from companies like Party City, Big Lots, Joann, and Rite Aid are forcing more closures.


Tariffs and trade wars are also causing retailers to hesitate in expanding their spaces. Despite these challenges, the shopping center vacancy rate reached 5.5% in Q1, but remains at historically low levels. Some businesses are expanding their footprint, such as off-price retailer Burlington and discount retailer Five Below. Tariffs may also impact landlords losing big-box tenants, as the cost of reconfiguring space for incoming tenants is no longer justified compared to rent gains. Tenants are also gaining leverage in their relationship with landlords, commanding concessions to maintain a steady flow of revenue.


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Owners will invest $300M to modernize Midtown Manhattan office


RXR and Ivanhoé Cambridge have extended their $1 billion mortgage on their Midtown Manhattan office building, 1211 Sixth Avenue, for three years. The loan, which was flagged by Fitch Ratings due to a low debt service coverage ratio, was sent to special servicer Berkadia. The owners will also invest $300 million to modernize the building, redesigning the plaza and reimagining a multi-tenant lobby. Credit rating agency KBRA downgraded the mortgage due to an "impending decline in the property's occupancy."


Fox and News Corp. were previously planning to abandon 330,000 square feet. Fox agreed to an extension in January 2023 to stay at the property and continue using 1.2 million square feet until 2042. However, occupancy is expected to decline, as law firm Ropes & Gray plans to leave over 300,000 square feet in two years. RXR acquired a 49 percent stake in the 45-story, 1.8-million-square-foot building in January, with Canadian pension fund Caisse de dépôt et placement du Québec owning the majority stake.


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Brand from former American Apparel founder leasing 25K sf for New York City debut


Los Angeles Apparel, the latest apparel brand from American Apparel founder Dov Charney, has signed a 25,000-square-foot lease at 480 Broadway in Soho, New York. The store will be making its first New York inroads, with its store between Broome and Grand streets. The company will be moving into space formerly occupied by TopShop. KPG Funds, co-founder Greg Kraut, believes the lease reflects their mission to support mission-driven brands that contribute to the cultural and economic fabric of cities.


The 100,000-square-foot building allows for the possibility of sizable leases, with one of the city's biggest leases three years ago being the Museum of Women. KPG and LaSalle Global Partner Solutions closed on their acquisition of the property early in 2022, planning to reposition the building as a boutique luxury office building. As of 2022, Los Angeles Apparel employs more than 1,500 people. Ralph Lauren recently purchased 109 Prince Street in Manhattan for $132 million, fending off a challenge from French conglomerate LVMH. Soho was Manhattan's second-most active market in terms of retail leases in the first quarter, with 11 deals totaling more than 46,000 square feet, led by Adidas' relocation to 8,700 square feet at 135 Spring Street.


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Chime leases in Flatiron District office property 122 Fifth Avenue


San Francisco-based fintech firm Chime is leasing 84,000 square feet from the Bromley Companies at 122 Fifth Avenue in the Flatiron District, with an asking rent of $96 per square foot. Chime will be relocating its primary Manhattan office space from 101 Greenwich Street. The move represents an expansion, as the building was renovated over three years ago to attract a next generation of tenants. Microsoft signed a long-term lease for 150,000 square feet at the property, which Bromley has owned for almost half a century.


Barnes & Noble moved its headquarters there in 1987, where it remained until its hedge fund parent company declined to renew the lease shortly after the 2019 acquisition. Chime's expansion contrasts with its recent dealings in San Francisco, where it listed two of its six floors at 101 California Street for sublease in 2022. The move came the year after signing a 200,000-square-foot lease in the city's downtown district, the largest office lease in San Francisco that year.


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Banking giant, relocating, expanding with Midtown East deal 


PNC Bank has signed a 15-year lease for 83,000 square feet, marking the end of a nearly two-decade run at the property. The bank will take the entire 11th and 12th floors and part of the 14th floor. The move follows a similar move from Barings' 340 Madison Avenue. The deal, underlines the strength of Manhattan's Class A office market. Other tenants at the property include Santander Bank and Armanino. The deal retired a $145 million loan from Bank of America. In April, tenants inked deals for 3.38 million square feet in Manhattan, up 23 percent year-over-year. Leasing volume declined, but the availability rate dropped to 15.7%, the lowest since February 21. The average asking rent last month remained steady at $74.37 per square foot, but still 6.4 percent below the mark from March 2020.


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First NYC office sale to crack billion-dollar mark since Google parent's 2022 purchase


Scott Rechler's RXR is set to buy 590 Madison Avenue for nearly $1.1 billion, making it the most expensive office deal in New York in several years. The 1 million-square-foot tower was bought from the State Teachers Retirement System of Ohio, the state's teacher pension fund. The price is closer to $1.1 billion than it is to $1 billion. The deal was a result of intense competition for the building, which drew attention from many of the biggest investors. Tishman Speyer, Blackstone Group, SL Green, and RFR were all in the mix late in the process. Blackstone was the odds-on favorite to emerge as a buyer, and a high-net-worth European investor showed strong interest in buying the building. The competition for the property led to a full sale, and the deal makes it the first New York City sale to crack the $1 billion mark since Alphabet bought its Hudson Square office building in 2022. The 42-story 590 Madison, built in 1983, served as the headquarters for IBM.

 

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