I think downtown Manhattan is still a better area compared to current HY and Midtown (from Penn to Times square). The only areas that are better are like Columbus Circle, Grand Central area, and everything from Herald Sq to Union Sq.
That Penn to Times Sq area is just horrid Imo. I would be very upset if my office was there. Downtown Manhattan is not nearly as bad as people think. Very undervalued Manhattan area probably mostly due to the stigma of post-9/11 desolation of 2000s-early 2010s.
It's harder to get to, especially if you live in the 'burbs. Probably why the other areas are doing better. I read that more people are living there since 9/11, which helps. I still don't like the new design or the previous stacked box junk.
I think downtown Manhattan is still a better area compared to current HY and Midtown (from Penn to Times square). The only areas that are better are like Columbus Circle, Grand Central area, and everything from Herald Sq to Union Sq.
That Penn to Times Sq area is just horrid Imo. I would be very upset if my office was there. Downtown Manhattan is not nearly as bad as people think. Very undervalued Manhattan area probably mostly due to the stigma of post-9/11 desolation of 2000s-early 2010s.
Downtown has direct connections to Jersey City and Hoboken, which makes it easy for Jersey commuters. And of course, the subway lines direct to Brooklyn. The area between Penn and Times Square is not really considered as being among the city's core business districts (which are more strictly defined). But as we've seen with the Hudson Yards area, what is it not necessarily what will be. The Hudson Yards was basically a wasteland of parking lots and warehouses. But it's been turned into one of the top business destinations, all thanks to a single subway line, and zoning. The Penn Station district is already a vibrant area, even if it doesn't have much in terms of the top office space, But as with the HY, that can change overnight.
As far as the WTC redevelopment goes, it's all a matter of availability. Silverstein could be filling this tower with tenants, it just needs to get built. But financing is harder to come by these days, especially without a large tenant signing. And for the people who all doubted that the WTC should be rebuilt at all, the only thing you need to know is this:
Quote:
“The WTC campus is 95% leased..."
That alone is a victory.
__________________ NEW YORK is Back!
“Office buildings are our factories – whether for tech, creative or traditional industries we must continue to grow our modern factories to create new jobs,” said United States Senator Chuck Schumer.
If is wasent for Hudson Yards, this tower would have been built and filled in 2015.
Not really. Two different issues, two different parts of town. The Hudson Yards filled up quicker because even that part of Manhattan is still Midtown. JPMC once considered building a headquarters at 5 WTC. They looked at the Hudson Yards as well before deciding the best option for them. This tower was last redesigned when News Corp was going to anchor it. They didn't suddenly decide to move to Hudson Yards, they just didn't move. Early anchors of Hudson Yards towers like Coach and Time Warner were never going to move Downtown in any case.
Looks like Rupert Murdoch's vassals aren't headed to the World Trade Center after all—both 21st Century Fox and News Corp will stay in Midtown, having previously struck a deal to serve as 2 World Trade Center's anchor tenants.
The Post, which is owned by News Corp., reports that the media companies will remain at 1211 and 1185 Sixth Avenue for the next decade, after landlord Callahan Capital Properties made them a deal to extend their lease by another five years.
__________________ NEW YORK is Back!
“Office buildings are our factories – whether for tech, creative or traditional industries we must continue to grow our modern factories to create new jobs,” said United States Senator Chuck Schumer.
Two World Trade Center is rarely in the news now compared to even 2017-2019, 2020, 2021 and early 2022, but here is a blurb about it in a New York Post article recently:
Asking office rents continue to ebb downward. Two World Trade Center seems no closer to rising than it did 10 years ago as Larry Silverstein prays for a tenant. An attractive beer garden and art installation can’t hide the disappointment of a World Trade Center one tower short of a full quartet.
The WTC complex still doesn’t have a single full-service restaurant outside of Eataly. The Westfield Mall and the Oculus remain a food wasteland despite having a few fast-casual spots.
Hopefully with the re-opening of Century 21 on April 25, 2023 and the completion of the PAC later in September 2023, not only will there be more tourist and business activity spurring retail and dining in 3 WTC and the Oculus, but also more interest in Two WTC from prospective tenants.
This video render from https://tribecacitizen.com/2023/03/0...g-arts-center/ (specific video: https://vimeo.com/803187868?embedded...owner=48150388) shows from 1:16 to 1:33, 2:06 to 3:27 and 4:02 to 4:35, that within a few years after the construction of the PAC is complete and the PAC is open to the public, trees might line the eastern section of Greenwich Street and northern section of Fulton Street around the site of Two WTC, while the site itself remains inactive. Currently there are planters positioned along these sections, many of which need to have the shrubs and vines in them replaced annually.
The setup that could arise for the interim period while construction is pending reminds me a bit of how trees were temporarily planted in the mid 1970s at the site of 3 WTC on the original WTC site, before the hotel at that site began construction in the early 1980s. Beautification of the site in this way might also attract more positive attention from prospective tenants. Right now the scene around Two WTC with only graffiti colored planters lining eastern sections of Greenwich Street and northern sections of Fulton Street is really starting to get old and wear out its welcome imo.
Last edited by worldtrade2021; Apr 11, 2023 at 3:00 AM.
That statement about restaurants is very misleading.
Its true that WTC complex doesn't have that many restaurants *inside the WTC buildings themselves*, but there are plenty of restaurants in nearby buildings.
Brookfield place is miles better than the Hudson Yards mall, and for more upscale dining there are places like Nobu. Hudson Yards is practically a food desert compared to downtown.
Hopefully with the re-opening of Century 21 on April 25, 2023 and the completion of the PAC later in September 2023, not only will there be more tourist and business activity spurring retail and dining in 3 WTC and the Oculus, but also more interest in Two WTC from prospective tenants.
While that'll be nice for the area does that really up the chances of landing a tenant much?
God I hope so... if this doesn't get started this decade I've lost hope.
While that'll be nice for the area does that really up the chances of landing a tenant much?
God I hope so... if this doesn't get started this decade I've lost hope.
It is better at least than if the PAC site had remained an inactive/inaccessible construction site not built up to street level and if Century 21 had not planned to re-open.
Clearly the WTC branding or availability of Class A office space at the site hasn't been enough by itself to be a good sell to tenants.
Imo although developers at Silverstein Properties know that the longer time it takes for construction plans to be made on Two WTC, the more difficult it will be to build, they aren't at all willing to build on spec or contend with the possibility of leasing to minor tenants that only occupy a few floors in a case-by-case situation as the building is being built. They insisted on having this same approach in 2021 and 2022. The situation now for leasing is arguably worse than in 2021 and 2022. So they have to rely on the area around Two WTC being seen as an attractive prospect that stands out and exceeds expectations compared to other locations, as far as major would-be anchor tenants are concerned.
The re-opening of Century 21, the opening of the PAC and (hopefully) beautification of the eastern sections of Greenwich Street and northern sections of Fulton Street with trees might help to this end, along with if there are more restaurants and retail opening on the lower floors of 3 WTC (not likely now, but perhaps at a later time in the future).
Of all the recent developments at the WTC site, the opening of the PAC probably has the most potential to attract new tenants, but there probably needs to be more retail leasing activity for 3 WTC also, as that has been a consistent deficiency pointed to as a drawback and sign of inactivity that could be making tenants wary of committing to the site.
The abundant sponsored graffiti on the planters and shuttered retail in 3 WTC is doing the site no favors, it just makes portions of it look abandoned.
New York’s Office Vacancy Rate Hits Record High as Troubling Signs Stack Up
Remote Work, High Interest Rates Among Factors Creating Distress, Real Estate Executives Say
By Andria Cheng
CoStar News
April 3, 2023
The office vacancy rate and available sublet space in Manhattan, home of the largest U.S. concentration for this property type, both rose to new records as remote work, higher interest rates, layoffs and concerns about a possible recession wrought further damage to an already troubled New York market.
The first-quarter office vacancy rate in Manhattan reached 16% for the 470 million square feet of space tracked by JLL, the brokerage firm said, adding that leasing has continued a slowdown that began at the end of last year. Despite what it described as “resiliency at the top of the market,” reflecting the flight-to-quality pattern, JLL said first-quarter leasing volume is the smallest since the second quarter of 2021.
“We’re going to have a very significant distress cycle in the office sector” in the United States, Roger Morales, partner and head of commercial real estate acquisitions at private equity giant KKR, said at Goodwin and Columbia Business School’s 2023 Real Estate Capital Markets Conference in New York on Wednesday.
In another indication of market malaise, the city’s office leasing activity in the first quarter was driven by renewals as “discretionary deals” slow and tenants “exercise caution at a time of increasing economic uncertainty,” Savills said in its first-quarter Manhattan market report. Renewals made up 63.1% of first-quarter leases, “a major increase” from 44.6% just one quarter earlier, Savills said.
Meanwhile, companies putting spaces up for sublease reached an all-time high of 22.4 million square feet in the first quarter, accounting for 24.6% of all available office space in Manhattan, Savills said.
CoStar data also shows office vacancies both in New York and nationwide have reached new record highs.
“Landlords are under even more pressure to stay competitive, either by investing in new tenant amenities or by offering generous concessions,” JLL said. “But, with higher borrowing costs and tighter access to funding, capital-constrained landlords may find it hard to add amenities or offer competitive incentives.”
The latest market scorecard come as security firm Kastle Systems’ average return-to-office rates in both New York and other major cities still hovers around 50%, more than three years after the start of the pandemic. The metric in some markets including New York has never crossed the halfway mark during that time.
Heads of major office landlords, such as Boston Properties Chief Executive Owen Thomas, described the space as being “in a recession” while Vornado Realty Trust’s Steven Roth recently conceded “Friday is dead forever. Monday is touch and go,” as he said some corporate leaders have “no power” to get people back to the office.
“Coming out of the pandemic, human behaviors changed,” Brady Welch, founding partner at Slate Asset Management, said at the conference. “There’s a lack of leadership to get people back in the office. … [The impact isn’t] just about an office. It’s the whole ecosystem of the city.”
Rents Drop at Trophy Towers
The low office use rate is compounded by the fact that higher interest rates and fears about an economic downturn have seized up financing and other market activity, with the issues further exacerbated by the recent fallout of regional banks such as New York’s Signature Bank that have been among major lenders to real estate projects.
Also, job cuts and a pause or change in expansion plans from tech giants including Google and Amazon, which have been key occupiers of top-tier office space in New York and other cities, threatened to create more supply in the marketplace at a time of uncertain demand.
New York office space that hit the sublease market in the first quarter included Twitter’s offices at 245 and 249 W. 17th St. (CoStar)
For instance, while deals over $100 per square foot made up 22% of Manhattan’s first-quarter leasing volume, a large amount of trophy sublease space that came on the market in the second half of 2022 led to the steepest decline in trophy towers’ direct rents since the third quarter of 2021, JLL said.
Trophy direct rents dropped to $103.49 in the first quarter from $105.74 in the fourth quarter and from a peak of $113.10 in the second quarter of 2021, Andrew Lim, JLL’s research director, told CoStar News in an email, adding that 40% of Manhattan’s trophy tower vacancy at the end of 2022 was sublease space.
“This glut of sublease space, a lot of it in new construction with long sublease term lengths available, was arguably able to compete with the direct trophy space,” Lim told CoStar.
Manhattan’s average overall rents remained essentially unchanged at $76.96 per square foot in the first quarter as rising Class A direct rents offset declines in Class B and sublease space, JLL said.
Subleasing is just one element driving record New York vacancy. More than 1.5 million square feet of office inventory was added in the first quarter from the completion of 660 Fifth Ave.’s renovation, which increased the vacancy rate, according to JLL.
KKR’s Morales expects the return to “some equilibrium in supply versus demand” is “going to take a very long time,” and almost every office building had at least one or two lease terminations going back to 2020.
The various factors at play facing the market have led major office landlords including Brookfield Asset Management and Columbia Property Trust to default on office loans recently.
Columbia, which owns top-tier properties in gateway cities from New York to San Francisco, defaulted on a $1.72 billion floating-rate loan backed by seven of its towers in New York and other cities housing well-known tenants including WeWork, Twitter, BuzzFeed and Snapchat. Brookfield’s loan defaults are tied to a pair of Los Angeles buildings.
‘Painful Process’
“It’s almost impossible to get a loan on a high-quality office building today,” Scott Rechler, chairman and chief executive of New York-based developer RXR Realty, told a packed room of nearly 500 at the conference. Every building has “been painted with the same brush. … No one wants to go to their credit committee or their investment committee and talk about an office building. … Where you’re seeing the cracks isn’t necessarily the quality of the buildings. It’s the capital structures that are on those buildings.”
Still, therein lies the opportunities, Rechler said. RXR is making $250 million in preferred equity investments in some office properties to “get a preferred return and a share of the upside in that area,” he said. “It’s an opportunity for those that want to look through the noise … and identify which are the ones that will be successful, and make those investments.”
About 20% of buildings in New York are “competitively obsolete,” Rechler said, with only some of them suited for conversion to multifamily and other uses.
“This is probably a 20-year painful process that’s going to create a significant amount of challenges to our city’s ecosystem,” he said, adding some 70% of the city’s revenue comes from real estate taxes. “This is really more of an existential threat to our city.”
And the problem is far from being exclusive to New York.
“It’s not in New York alone,” Rechler said. “I’d rather be in New York than San Francisco. San Francisco can be the Detroit of our generation [being] so focused on one industry. New York’s big asset is talent. We have this incredibly deep diverse talent pool that nowhere else in North America or the world has. New York has the best and brightest talent across so many sectors. … There are lots of cities that don’t have that.”
RXR bought $2 billion of multifamily property during the period of the pandemic when “everyone was leaving” New York, Rechler said. The occupancy rate at the properties, however, has surged to 98% from the low 80% range at the time of purchase, Rechler said.
One of the Most Overlooked Reasons for Returning to the Office Just Got a Lot More Dire
Attendance at office buildings in major cities from San Francisco to New York remains below pre-pandemic levels.
By Amanda Breen • Apr 11, 2023
When we talk about employees returning to in-person work, the conversation often turns to alleged benefits like increased productivity and improved communication.
But the health of commercial real estate and the economy are also critical considerations. In a recent report, Morgan Stanley analysts predicted the situation's about to get worse, with commercial property prices tumbling as much as 40% — rivaling the dip during the 2008 financial crisis.
Three years into the pandemic, attendance at office buildings in major cities including New York, Boston, Atlanta and San Francisco remain low, and many companies choose to move to smaller spaces when leases are up for renewal, The New York Times reported.
At the end of March, San Francisco Mayor London Breed's office said it anticipated a $780 million budget shortfall in the next two fiscal years through 2024 as a result of higher interest rates and widespread remote work that "makes office space an unattractive investment."
Not only are trillions of dollars of commercial mortgage debt on track to mature in the next several years — likely amid even higher interest rates — but there's also the concern about how under-utilized office buildings will continue to impact the rest of the economy, MarketWatch reported.
"These kinds of challenges can hurt not only the real estate industry but also entire business communities related to it," Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, wrote.
American offices are half-empty. That could be the next big risk for banks
Julia Horowitz
Mon April 10, 2023
London CNN —
From Dallas and Minneapolis to New York and Los Angeles, offices sit vacant or underused, showing the staying power of the work-from-home era. But clear desks and quiet break rooms aren’t just a headache for bosses eager to gather teams in person.
Investors and regulators, on high alert for signs of trouble in the financial system following recent bank failures, are now homing in on the downturn in the $20 trillion US commercial real estate market.
Just as lenders to the sector grapple with turmoil triggered by rapidly rising interest rates, the value of buildings such as offices is crashing. That could add to pain for banks and raises concerns about damaging ripple effects.
“Although this is not yet a systemic problem for the banking sector, there are legitimate concerns about contagion,” said Eswar Prasad, an economics professor at Cornell University.
Un the worst-case scenario, anxiety about bank lending to commercial real estate could spiral, prompting customers to yank their deposits. A bank run is what toppled Silicon Valley Bank last month, roiling financial markets and raising fears of a recession in the United States.
Asked about the danger posed by commercial real estate, Federal Reserve Chair Jerome Powell said last month that banks remained “strong” and “resilient.” But attention is growing on the links between US lenders and the property sector.
“We’re watching it pretty closely,” said Michael Reynolds, vice president of investment strategy at Glenmede, a wealth manager. While he doesn’t expect office loans to become a problem for all banks, “one or two” institutions could find themselves “caught offside.”
America’s top banker, JPMorgan Chase (JPM) CEO Jamie Dimon, told CNN Thursday that he couldn’t be sure whether more banks will fail this year. Yet he was quick to point out that the current situation was very different to the 2008 global financial crisis, when there were “hundreds of institutions around the world with far too much leverage.”
The US market looks most vulnerable. Yet the European Central Bank and Bank of England have also recently warned of risks tied to commercial real estate as the outlook for prices deteriorates.
Work-from-home bill comes due
Commercial real estate — which spans offices, apartment complexes, warehouses and malls — has come under substantial pressure in recent months. Prices in the United States were down 15% in March from their recent peak, according to data provider Green Street. The rapid increase in interest rates over the past year has been painful, since purchases of commercial buildings are typically financed with large loans.
Office properties have been getting hammered the hardest. Hybrid work remains popular, affecting the rents many building owners can charge. Average occupancy of offices in the United States is still less than half March 2020 levels, according to data from security provider Kastle.
“You have fundamentals under pressure from work from home at a time when lending is less available than [it has been] over the last decade,” said Rich Hill, head of real estate strategy at Cohen & Steers. “Those two factors will lead to a pretty significant decline in valuations.”
Trouble may build as the economy slows. Hill thinks US commercial property valuations could fall roughly 20% to 25% this year. For offices, declines could be even steeper, topping 30%.
“I’m more concerned than I’ve been in a long time,” said Matt Anderson, managing director at Trepp, which provides data on commercial real estate.
Signs of strain are increasing. The proportion of commercial office mortgages where borrowers are behind with payments is rising, according to Trepp, and high-profile defaults are making headlines. Earlier this year, a landlord owned by asset manager PIMCO defaulted on nearly $2 billion in debt for seven office buildings in San Francisco, New York City, Boston and Jersey City.
What it means for banks
This is a potential problem for banks given their extensive lending to the sector. Goldman Sachs estimates that 55% of US office loans sit on bank balance sheets. Regional and community banks — already under pressure after the failures of Silicon Valley Bank and Signature Bank in March — account for 23% of the total.
Signature Bank (SBNY) had the tenth biggest portfolio of commercial real estate loans in the United States at the start of the year, according to Trepp. First Republic (FRC), which received a $30 billion lifeline last month from JPMorgan Chase and other major banks, had the ninth largest. But both had a much a greater share of their assets tied up in real estate than bigger rivals such as Wells Fargo (WFC), the leading US lender to the sector.
Banks are in turmoil but a bigger financial crisis may be brewing elsewhere
The rise in commercial property prices over the past decade has provided developers and their bankers with a measure of protection. But pain could increase in the coming months.
About $270 billion in commercial real estate loans held by banks will come due in 2023, according to Trepp. Roughly $80 billion, nearly a third, are on office properties.
Plummeting valuations will make refinancing tougher for property owners, who are likely to face requests from banks to put up more equity. Some owners — especially of older, less desirable office buildings — might decide it’s not worth the expense given the market climate and simply hand back the keys.
Banks may prefer that option to kickstarting drawn-out, expensive foreclosure processes. But it puts them in the difficult position of owning depreciating properties.
“That is a scenario we will see now very often,” Christian Ulbrich, chief executive of global commercial real estate services giant Jones Lang LaSalle (JLL), told CNN. The question, he continued, is what lenders will do in that situation, and whether banks are sitting on such sizable loan portfolios that they need to take “significant losses.”
Keeping watch
Banks have less capacity to stomach financial blows these days. Smaller institutions are grappling with outflows of deposits to larger peers and money-market funds offering better returns. Plus, bank investments in government bonds, once considered low-risk, are notching up losses as interest rates climb.
The worst outcome, according to Neil Shearing, chief economist at Capital Economics, is that a “doom loop” develops. Questions about the health of banks with sizable exposures to commercial real estate loans cause customers to pull deposits. That forces lenders to demand repayment — exacerbating the sector’s downturn and further damaging the banks’ financial position. That triggers more deposit outflows in a “vicious cycle.”
That is not the central expectation right now. Since the 2008 financial crisis, banks have tightened lending standards and diversified their clientele. Loans for offices account for less than 5% of US banks’ total, according to UBS. And Ulbrich of JLL said that while the speed at which borrowing costs have risen has put significant pressure on the commercial real estate industry, it has lived with rates at this level for “most of its history.”
“There’s always a risk for self-fulfilling prophecies here, but I would still be fairly optimistic things will play out in a digestible way,” Ulbrich said.
The likeliest outcome is thought to be an uptick in defaults and reduced access to funding for the commercial real estate industry. Banks, it’s predicted, will weather the storm, though their earnings may take a beating.
That doesn’t mean, however, there won’t be spillovers.
“Distress of this type has historically not only hurt the landlords and the bankers who lend to them,” Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, said in a note to clients this month. Non-bank lenders, related businesses and investors may also be hurt, she said.
Last edited by worldtrade2021; Apr 11, 2023 at 11:25 PM.
just curious…would there ever be a chance the tower would be taller than wtc 1?
no.
__________________ NEW YORK is Back!
“Office buildings are our factories – whether for tech, creative or traditional industries we must continue to grow our modern factories to create new jobs,” said United States Senator Chuck Schumer.
Can't believe I am saying this but the stacked boxes proposal does not look too bad from that angle...
Sadly the stacked Jenga boxes look goofy in the grand scheme of the complex, not only is Foster's design more refined & scaled accordingly for the entirety of the WTC site but the top panels reflect light back downward into the two memorial pools.
This mildew or garden box 'environmentally friendly' trend is pampering to the whole woke community of noobs and vegan protesters that most sane people wouldn't want to be in the same building let alone neighborhood as...
IMHO.. These box towers with gnome moss-gardens look good as residential buildings in Greenwich Village or SoHo rising a few hundred meters at best but not as the apex of the more business centric WTC and lower Manhattan skyline.
__________________
'One entered the city like a god; one scuttles in now like a rat' (On Penn Station) Vincent Skully
__________________
The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts. (Bertrand Russell)
i dislike the stacked boxes. I am really getting sick of that starchitectural style.
__________________
The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts. (Bertrand Russell)
Most (in this thread) seem to prefer Foster's original design as it compliments the memorial better. BIG & Foster's later designs are ok.. maybe built by themselves elsewhere or in midtown.
Eitherway it looks like this site will be vacant for the time being with some recent hope that maybe 5WTC will pick up steam. No major tenant, recession, tigher lending, interest rates rising and falling commercial prices are problematic. However, I'll gladly wait a few more years if they can resurrect the original.
__________________
'One entered the city like a god; one scuttles in now like a rat' (On Penn Station) Vincent Skully
I'd take the stacked boxes any day over that diamond Foster bizarro. Probably in the minority though.
Probably, this may surprise people but I don't really love either that much. The diamond design is nice from some angles but looks messy at the top due to the proportions.
I actually like the new design(s), if only it could be built on spec or land a tenant.
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