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Weekly Market Report - October 21, 2025

  • Writer: Broker Support
    Broker Support
  • 1 day ago
  • 18 min read

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Manhattan office space is leasing at a rate not seen since 2006, while office markets in other cities are plodding along


New York City's office market is experiencing its largest boom in nearly 20 years, with businesses leasing 23.2 million square feet of office space in Manhattan during the first nine months of 2025, surpassing pre-pandemic levels. Factors driving this recovery include a return-to-office trend and heightened demand for modern workspaces from sectors like financial services, technology, and media. Developers are proceeding with several new office projects, encouraged by a high number of leases signed at premium prices. However, the vacancy rate remains at 14.8%, nearly double that of late 2019. Concerns arise from potential political changes and the condition of older buildings, but some are being repurposed as housing amid a wave of conversions.


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Jeff Blau reportedly beat Vornado, SL Green for the gig


Prada's significant real estate investment on Fifth Avenue has drawn attention, with the luxury brand purchasing space from Jeff Sutton for over $800 million. Jeff Blau's Related Companies is close to finalizing a deal to develop a 225,000-square-foot skyscraper at 720-724 Fifth Avenue, potentially integrating it with the adjacent Aman hotel amenities. Prada will occupy the ground level for its store, with corporate offices above, along with luxury residences that may fetch prices exceeding $10,000 per square foot. During construction, Prada will need to relocate.


Earlier in 2023, Prada engaged JLL to seek development partners, resulting in a successful collaboration with Related, outpacing other firms like Vornado and SL Green. In late 2023, Prada confirmed its acquisition of 724 Fifth Avenue for $425 million, equivalent to $6,538 per square foot. Subsequently, it announced a $410 million purchase of the neighboring property at 720 Fifth, also from Sutton. Sutton's refinancing endeavors over recent years included multiple transactions for 724 Fifth, which he first acquired with SL Green in 2012, and have since brought full ownership by 2018.


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Two real estate firms, Davis Cos. from Boston and Tribeca Investment Group from New York, have acquired a majority stake in a Third Avenue office building, currently about 40% vacant, with plans for extensive renovations to boost tenant attraction. They are investing $50 million in the property located at 630 Third Ave., a 23-story building close to Grand Central Terminal, which has seen a decline in demand compared to Park Avenue buildings post-pandemic. The total investment will be used for property renovation and stabilization. ATCO Properties, which owned the building and purchased out its former partner in 2022 for approximately $97.8 million, has seen the building's occupancy at 68.1%.


Planned upgrades include lobby renovations, a tenant amenity and conferencing space with landscaped outdoor terraces on the 19th floor, and move-in ready office suites. Renovation work is slated to commence early next year and conclude by the third quarter. Current tenants include ICF International, Leader Berkon Colao & Silverstein, and the Permanent Mission of Slovenia to the UN. Davis has expanded its New York footprint with various residential investments, while Tribeca has previously invested in notable properties like 295 Fifth Ave. and the Baccarat Hotel. ATCO also has a diversified portfolio that includes the office building at 555 Fifth Ave. and a luxury rental at 41 W. 58th St. Additionally, ATCO aims to sell two properties at 373 and 381 Park Ave. South for $130 million.


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SL Green has contracted to purchase the 622,000-square-foot Park Avenue Tower for $730 million from Blackstone, making it one of the year’s largest office transactions. Expected to close in the first quarter, this acquisition reinforces SL Green's position as a leading owner of premier Park Avenue properties amid high demand. The tower, located at 65 E. 55th St., was 87% occupied as of January 2024, with average rents at $112 per square foot, which is considered below-market given the low 11% vacancy rate in the corridor.


Blackstone previously acquired the tower for $750 million in 2014 and invested $170 million in renovations after losing two major tenants in 2016. The property was initially listed for $800 million in 2019 but did not sell. In the current transaction, Eastdil Secured represented Blackstone. SL Green, which already owns seven properties in the area, also announced the sale of a 5% stake in 1.7 million-square-foot One Vanderbilt to Mori Building Co., further solidifying its investment portfolio, valued at $4.7 billion, one of the highest in the country.


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New issuance could reach $121B in 2025


CMBS issuance in New York is expected to hit $121 billion in 2023, the highest since 2007, driven primarily by office transactions. Significant office collateral is evident, with seven of the top 20 single-asset-single-borrower CMBS deals this year involving office properties. A notable deal includes Tishman Speyer’s $2.65 billion CMBS loan for the Spiral, a prominent office building in Hudson Yards. Trepp's chief product officer, Lonnie Hendry, highlights CMBS as an ideal marketplace for large deals in the sector that can be executed efficiently without competing lenders.


Historically, CMBS has been favored by NYC office developers for refinancing, offering cost-effective financing through bundled loans sold to investors. Though CMBS demand waned during the 2008 financial crisis, interest in commercial real estate revitalized the market, with issuance climbing from $55 billion in 2020 to $109 billion in 2021. However, following the Federal Reserve's rate hikes in 2022, CMBS spreads increased, leading to lower issuance. The current focus is on single-asset loans in specific markets, reflecting selective investor interest amid ongoing distress, as highlighted by record CMBS delinquency rates, peaking at 11.66% in August and 11.13% in September.


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A 27-story building at 650 Madison Ave, co-owned by Vornado Realty Trust and Oxford Properties, is entering special servicing after a recent appraisal reduced its value from $1.2B to $950M, marking a 21% drop. The joint venture, citing an “imminent monetary default,” has requested that the $800M CMBS loan be transferred to Green Loan Services LLC. A payment default occurred when owners failed to cover a waterfall shortfall, with Ralph Lauren reducing its footprint by 40% causing this shortfall. The landlord-tenant deal from 2023 resulted in Ralph Lauren, the largest tenant, paying 30% less rent, further impacting the building's net operating income which declined by 3% prior to this adjustment.


Occupancy dropped from 82% in 2024 to 74% by June, down from 97% when the loan was underwritten. Morningstar's David Putro notes the situation is atypical compared to distressed office cases, suggesting potential modifications for short-term relief. The Plaza District, however, remains a strong market, showcasing the lowest vacancy rates and significant leasing activity, with 1.85M SF leased in Q3. Vornado and Oxford purchased the property in 2013 for $1.3B and refinanced it with a 10-year, $800M loan in 2019.


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SL Green revealed it spent approximately $13 million in its attempt to secure a casino license. Investments in an office tower on Park Avenue for $730 million and another on Madison Avenue for $160 million somewhat mitigated the disappointment, though adjusted funds from operations fell to $1.00 per share, 40 cents below expectations due to increased operating and borrowing costs, alongside a revenue decline at the Summit observatory atop 1 Vanderbilt Ave.


The company’s stock fell 4% to $55 per share, reflecting a 20% drop this year, as investors express skepticism about the longevity of New York's office leasing boom. Despite this, SL Green's occupancy rate increased to 90.9%, aided by leasing 660,000 square feet across various properties. Weakness at 1 Vanderbilt’s Summit was linked to the closure of the Ascent glass elevator for repairs. SL Green faces $13.1 million in transaction costs from its gaming license pursuit. Analysts commended the acquisition of the Park Avenue Tower and ongoing plans to develop additional properties on Madison Avenue.


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MGM Resorts' unexpected exit from New York's casino bid has left only three contenders for three available licenses, significantly diminishing the competitive landscape intended by state officials. Initially, eight bidders vied for the licenses, but community opposition and concerns over financial viability led to the reduced field. State officials still retain the ability to award zero, one, or two licenses, preserving some leverage. Experts suggest that while the process remains intact, the remaining bidders exhibit a lack of urgency. For instance, the top contender, Metropolitan Park, has proposed the minimum tax rates required—25% on slot revenue and 10% on table games—indicating minimal competitiveness.


Bally's bid also adheres to low tax proposals, whereas Resorts World in Queens stands out with a more ambitious offer of 56% and 30% tax rates, projecting significant revenue for the state. The geographic proximity of the three remaining projects raises concerns about potential revenue competition. A 2021 study advocated for a Manhattan-based casino to maximize state revenue, a prospect now dimmed by MGM’s withdrawal. Opinions vary on the current bidding field; while some argue the lack of competition is concerning, others assert that achieving community approval for alternative locations is fraught with challenges, suggesting the existing process may be the best obtainable outcome.


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Ikea's exit from its 975,000-square-foot Staten Island warehouse has contributed to a rising vacancy rate in the industrial sector, which experienced a quiet third quarter according to JLL's report. The vacancy rate in the outer boroughs increased to 5.8%, up from 4.2% last year, largely due to Ikea's departure, though specific details on the facility remain unspecified. This warehouse was leased in 2018 as a fulfillment center. The reason for Ikea's exit is unclear and not linked to its recent $213 million purchase of a SoHo location for a new store. Last quarter, leasing activity in the outer boroughs declined, with companies leasing slightly over 500,000 square feet, a significant drop from approximately 690,000 square feet the previous year.


The average asking rent also fell year-over-year from $33.63 to $31.27 per square foot. The most significant lease was Spectrum's renewal of its 198,000-square-foot space at 59 Paidge Ave., reflecting continued activity in the utility and government sectors, which now represent 45.5% of the leasing activity. Class A properties comprise over half of the vacant industrial space in the city. Current zoning changes and high interest rates are expected to limit new construction, impacting inventory and fostering competition for existing space.


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Highgate Hotels faces potential eviction from OYO's Times Square hotel due to alleged mismanagement of an OYO property in Las Vegas. Highgate, managing the Park Lane Hotel and others in New York, contends OYO's termination of their management contract over performance issues is unwarranted, labeling the Times Square location as a "well-performing property." In court filings, Highgate argues that OYO's push for immediate departure violates labor laws requiring a 90-day notice for union employees. OYO denies this accusation, claiming their actions were intended for a smooth transition.


The dispute traces back to a cybersecurity incident at the Las Vegas hotel, where personal data of 4,700 individuals were compromised, leading to a decline in Highgate's performance. OYO cited Highgate's poor IT practices as a reason for the contract termination issued on August 1, 2023, prior to the breach discovery. Following the termination, Highgate reportedly failed to cooperate with OYO during the transition, further complicating the situation.


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A developer is selling two flagship Marriott hotels near LaGuardia Airport in Queens for $55 million. East West United Realty Development Group has listed the Fairfield Inn & Suites and the Courtyard by Marriott, located at 183-31 and 183-15 Horace Harding Expy., respectively. Acquired for $13.5 million in 2014, the hotels were completed in 2018. The firm focuses on development opportunities and aims to sell these properties to divert attention to other projects, with Ripco Real Estate managing the sale. The hotels, offered only as a package, total 218 rooms—95 at the Fairfield Inn and 123 at the Courtyard.


Courtyard spans about 57,000 square feet, while the Fairfield Inn covers approximately 42,000 square feet, both being six stories tall. Room rates range from $254 to $283 per night, featuring amenities like fitness centers and conference rooms. A Ripco team is leading the sale, highlighting the properties' strategic location and limited competition as attractive features for investors. Additionally, the hotels are a short drive to the proposed Metropolitan Park casino near Citi Field, amidst a recovering hospitality industry that has seen slowed new hotel construction due to regulatory changes.


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JPMorgan is contesting its property tax assessments on four Manhattan properties, arguing they are excessively high. This stance mirrors widespread dissatisfaction among New Yorkers regarding the city's property-tax system, characterized by various exemptions that shift the tax burden onto others. Mayoral candidate Zohran Mamdani and former Governor Andrew Cuomo have criticized the system, calling it fundamentally unjust and politically problematic due to its implications for both beneficiaries and those adversely affected by reform. In response to burdensome assessments, property owners are increasingly pursuing legal challenges, with many appeals dragging on for years. A recent example is developer Jerry Speyer’s appeal regarding the assessment of his Upper East Side mansion.


Notably, JPMorgan has consistently filed appeals, excluding 2020, highlighting its status as a significant property owner in New York. The property tax code, last revamped in 1981, heavily favors certain property types, causing disparity where renters and commercial property owners shoulder more taxes. JPMorgan, which leases over 7 million square feet and recently opened a new headquarters, pays around $58 million annually in property taxes, yet contends this is excessive in light of tax benefits granted to entities like Columbia University, which it claims exacerbates the issue with its tax-exempt expansions. The specific appeal from JPMorgan targets perceived inaccuracies in the valuations of its four buildings, which house various banking functions, reflecting a broader trend of property owners seeking reassessment in the current tax climate. 


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Office leasing in Manhattan has reached a 20-year high, with major companies like Deloitte, Salesforce, and WeWork occupying significant spaces. However, commercial landlords' share prices are underperforming this year, with SL Green down 17%, Vornado down 7%, Empire State Realty down 30%, and BXP down 5%. Investor concerns have shifted to rising development costs amid fluctuating interest rates. SL Green’s upcoming quarterly report could impact this narrative, amid questions about its failed casino license bid and the potential implications of a Zohran Mamdani mayoralty. Empire State Realty is linked to a decline in tourist visits to the Empire State Building. Uncertainty surrounds BXP's new projects and Vornado's recent tower acquisition. Overall, REITs have seen a 1.5% drop this year, contrasting with a strong overall market performance and prompting discussions about potential buying opportunities based on fundamentals.


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New filings reveal breadth of bank’s losses on multifamily properties linked to imprisoned investor


Merchants Bank's financial exposure is becoming apparent as loans made to troubled investor Moshe Silber and his affiliated companies spiral into bankruptcy. The bank, based in Carmel, Indiana, previously became a leading lender for multifamily landlords. In the last quarter, it reported $46.1 million in write-downs after uncovering potential mortgage fraud among its borrowers. Silber, currently imprisoned, is entangled in a scheme that allegedly involved obtaining a $74 million loan for an apartment complex using a stolen identity. The bank claims over $61 million is owed from loans linked to Silber's properties across Flint, Danville, and Pittsburgh.


After the properties were abandoned in 2024, Merchants Bank appointed receivers to facilitate their sale, but potential sale prices indicate substantial losses. For example, the Midway Townhomes in Flint is under contract for just $1.5 million, down from a $21.6 million loan. Other properties show similar patterns, and bankruptcy may favor a buyer using debtor-in-possession financing, further disadvantaging Merchants. While some of Silber's loans seem securitized, the bank may be forced to absorb losses due to underlying fraud. The situation escalated when Silber's companies entered bankruptcy amid allegations of mismanagement and significant debt, further complicating Merchants Bank’s financial landscape, including its resistance to the bankruptcy proceedings.


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Purchase snags $13M premium from sale price five years ago


Shiya Labin sold a property in Borough Park, Brooklyn, for $42.3 million, significantly higher than its 2020 purchase price of $29.5 million. The buyer, George Lebovits of Ahava Medical, acquired the 151,000-square-foot Class B office building located at 6201 15th Avenue through Labin's limited liability company, 6201 BSD, at a price of $280 per square foot. The building has a tenant, Naccarato Insurance, occupying only 500 square feet, leaving the majority vacant, with an asking rent of $40 per square foot. The property includes a nearby vacant lot used for parking.


Constructed in 2002, the building was initially used for clothing manufacturing before being converted to office space. Dan Marks of TerraCRG noted the high demand from investors in Borough Park, attributing the above-average price to strong community ties. In other Brooklyn news, RXR Realty sold its first office acquisition in the borough, with Lincoln Property Company and Cross Ocean Partners purchasing the leasehold at 470 Vanderbilt Avenue in Clinton Hill for an estimated $70 million, translating to $108 per square foot, although the exact sale price was not publicly disclosed.


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Former Salvation Army building got top-to-bottom overhaul


KPG Funds has lost its control over the redevelopment of its Greenwich Village office after Thorofare took over the leasehold of the property at 132 West 14th Street for $27.7 million. KPG initially signed a ground lease with The Salvation Army in 2021 for $22.1 million, later acquiring a $34.5 million construction loan for a $55 million remodeling project, aiming to transform the aging building into a boutique Class A office and retail space. Despite redevelopment efforts, the project, which included major facade demolition and structural renovations, remained unfinished and lacked a new certificate of occupancy.


In June, KPG encountered financial difficulties, leading The Salvation Army to file a legal case against KPG for unpaid ground rent totaling $162,500, resulting in a default judgment in August favoring the Salvation Army, allowing Thorofare to intervene. This scenario reflects the increasing challenges in the current office market, with rising interest rates and leasing obstacles impacting even robust developers. KPG, led by Gregory Kraut and Rod Kritsberg, had aimed to revitalize older Class B and C buildings into upscale offices in neighborhoods like Soho and Tribeca, but market demand has been inconsistent.


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Once worth $2B, 1211 Sixth Ave’s value fell to $1.19B


Managing the billion-dollar property at 1211 Sixth Avenue has become challenging, with its valuation dropping 42 percent since 2015 to $1.19 billion from a previous $2 billion. This decline followed the property's loan being sent for special servicing and subsequently modified, compounded by decreased cash flow. The 44-story building, known for housing Fox News and News Corp’s publications, was purchased by Beacon Capital Partners for over $1.5 billion in 2006. Ivanhoé Cambridge acquired a 49 percent stake in 2013 and later purchased the entire property for $1.8 billion in 2016.


Revenue reports show a real decline, with last year's earnings at $170 million, down from an inflation-adjusted $187 million in 2015. Law firm Ropes & Gray, occupying 17 percent of the space, plans to relocate before its lease expires in 2027. In January, developer RXR acquired a 49 percent stake in the building. The loan, with $1.04 million outstanding, was transferred to special servicing in May but received a three-year extension. Recently, RXR secured a $1.45 billion recapitalization, with $367 million allocated for tenant improvements and leasing efforts.


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Kam Sang pays $250M for Edition Clocktower, Cain snaps up Dominick for $175M


Two luxury Manhattan hotels have been sold, indicating renewed investor confidence in the city's upscale hospitality sector. The Kam Sang Company acquired the Edition Clocktower Hotel at 5 Madison Avenue from the Abu Dhabi Investment Authority for approximately $250 million, or over $800,000 per key, marking one of the highest price-per-key transactions in recent years. This sale represents a decline from the $337 million the Abu Dhabi Investment Authority paid in 2015. The hotel will maintain its operation under the Edition brand.


Concurrently, Cain completed the $175 million acquisition of the Dominick Hotel in Soho from CIM Group, with assistance from Madison Realty Capital and Newbond for a $180 million loan. CIM, which bought the property through foreclosure in 2014 and rebranded it in 2017, sought to sell the hotel multiple times in recent years. The luxury hotel market in New York is rebounding as occupancy rates approach pre-pandemic levels, reported at over 84% in early 2024. However, challenges remain, including labor costs, high interest rates, and property taxes complicating profitability. Experts indicate strong revenue potential but caution against translating this into bottom-line profits.


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Agency cites "chaos" for customers, creditors in hotel operator’s bankruptcy


LuxUrban Hotels is undergoing bankruptcy proceedings, with the U.S. Trustee's Office requesting an independent trustee due to reported "chaos" and "gross negligence." The motion describes LuxUrban's operations as a "free fall," citing customer complaints of being stranded and unpaid staff. With less than $10 million in assets and over $50 million in liabilities, LuxUrban filed for Chapter 11 protection to continue operating its New York hotels. However, customers are being turned away despite having reservations, leading to emergency hearing requests.


Allegations also surfaced that LuxUrban owes wages to union workers and has illegally withheld over $57 million in retirement contributions. There are currently at least 85 lawsuits against the company, including claims of omitted creditors and $118 million in overdue sales taxes in the bankruptcy filing. Specific properties, like The Herald, have faced eviction for unpaid debts. Other issues include fines for illegal Airbnb operations and a Nasdaq delisting. The company's bankruptcy attorney has not commented.


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Scale AI signs for space from marketing service Wunderkind


Scale AI is subleasing 80,000 square feet at 1 World Trade Center from Wunderkind, an AI marketing service, as reported by the Commercial Observer. This move from their current 27,000-square-foot space at 218 West 18th Street is set for early next year, enabling Scale to increase its in-office workforce in Manhattan. The subleased space, located on the 74th and 75th floors, had an asking rent of $65 per square foot and the agreement runs until early 2030. CBRE's Eddie Sisca and David Opper represented Scale, while Savills’ Scott Bogetti and Will Joumas, along with CBRE’s David Hollander, represented Wunderkind.


In the greater context, the building's co-owners, The Durst Organization and the Port Authority of New York and New Jersey, oversee a structure of 3.1 million square feet with over 100 stories. Additionally, the Durst Organization has recently made the 89th and 90th floors available for lease, targeting rents around $160 per square foot. Meanwhile, The Bank of New York secured a sublease of 192,000 square feet from Conde Nast.


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Lewis Brisbois relocating to 140 Broadway


Union Investment's 140 Broadway has secured a notable lease with law firm Lewis Brisbois Bisgaard & Smith, which will occupy 70,000 square feet across three floors. This move, indicated as the second-largest lease in Lower Manhattan for Q3, aims to accommodate over 200 lawyers and enhance the firm’s service capacity for its growing client base. The location’s proximity to legal courts was highlighted as a significant advantage. While the exact rent remains undisclosed, the average in the Financial District is approximately $61.99 per square foot.


Lewis Brisbois plans to relocate from 7 World Trade Center, having previously been at 77 Water Street, now being converted to residential space by the Vanbarton Group. The firm follows global consultancy Arup, which recently leased nearly 100,000 square feet at the same property. The third quarter saw tenants lease 9.4 million square feet—a 2 percent increase from Q2 and nearly 27 percent above the five-year quarterly average. Overall leasing for the year has surpassed 30 million square feet, indicating strong demand exceeding pre-pandemic levels.


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Attorneys from the Department of Justice are pushing for an independent trustee to manage LuxUrban Hotels after alleging gross negligence in its pre- and post-Chapter 11 bankruptcy operations. LuxUrban, which filed for bankruptcy on September 14, reported assets of under $10 million and liabilities between $10 million and $50 million, operating four New York hotels. Reports surfaced that guests found two properties closed, and rooms remained bookable online despite the bankruptcy. A motion filed by U.S. Trustee William Harrington labeled the situation a “free fall,” necessitating a fiduciary to mitigate chaos for customers and creditors.


Complaints include unpaid wages for hotel staff and withheld 401(k) funds. LuxUrban faces over 85 lawsuits and has significant undisclosed debts, including $118 million in unpaid state sales taxes since 2020. Previously fined $1.2 million by New York City for illegal short-term rentals, LuxUrban's business pivoted to hotel leasing during the pandemic. Wyndham Hotel Group, a former partner, also claims over $17 million in unpaid fees and supports the U.S. Trustee's motion, citing substantial management failures. Judge David Jones indicated he might expedite the takeover ruling to protect creditors' interests before the scheduled October 21 hearing.


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The Domain Cos. has acquired The Vorea Group, enhancing its capabilities in New York City. Co-CEOs Matt Schwartz and Chris Papamichael will lead the merged entity, with Vorea's Peter Papamichael appointed as executive managing director. This strategic union follows a decade of partnership on multiple residential projects in the boroughs, including a recent 400-unit development proposed in Astoria. However, Vorea's existing assets will remain with Peter Papamichael's family office. Domain, managing $2.5B in mixed-use real estate, holds a $2B project pipeline, including the upcoming Greenpoint Landing development. The acquisition includes Vorea’s affiliates, Igloo and Vorea Construction Co., to enhance in-house services. The merged teams will align, with new roles assigned to former Vorea executives, reinforcing their commitment to innovation and transformative projects in the area.


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Amazon, TikTok and OpenAI are among the firms taking office space in Bellevue, where rents are higher than in the Emerald City


Snowflake recently opted to expand in Bellevue, Washington, rather than moving to downtown Seattle, taking 326,000 square feet of office space with panoramic views. Tech firms increasingly prefer Bellevue for its modern architecture, top-rated schools, and luxury shops, as Seattle wrestles with crime and quality-of-life issues, leading to a near-record 34.6% vacancy in prime office space. Bellevue has added significantly more office space since 2021 than Seattle and now attracts major companies like TikTok and Amazon, which has seen its Bellevue workforce grow to over 14,000.


The city's allure has gained momentum, especially after the East Link light rail eased congestion and connected Seattle and Bellevue. This development surge reflects a shift in sentiment, exacerbated by Seattle's increased business taxes and rising crime. Office rents in Bellevue now outpace Seattle’s, signaling a reversal of earlier trends. The COVID-19 pandemic further strained Seattle's downtown, while Bellevue's growth continued, fueled by firms like Meta expanding their presence in the region. Although both cities face challenges amid a tech industry slowdown, the push for employees to return to office work offers potential for recovery. Despite the shifts, advocates argue Seattle possesses unique cultural and geographic advantages that could foster resurgence, while Bellevue continues to capitalize on its safety and development focus.

 

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