February 15, 2023
Reality Setting In |
There's an old saying: “by the time it hits the news, it’s already old news”.
With several recent reports highlighting some of the major challenges facing the Midtown office market, many in the industry are hoping the public acknowledgement will give cover to the buildings in the market that desperately need to reset and revalue their respective valuations.
The days of extend & pretend are over with interest rates nearly doubling along with stagnant occupancy numbers. This double whammy is turning the screws on Landlords and Lenders alike, forcing them to either begin making deals at market rents when possible or hand over the keys.
There will undoubtedly be more pain in the short term (see below), but I believe this is the beginning of a healthy and necessary reckoning for the Midtown office market.
Some of the buildings recently in the news and a quick take:
1) 515 Madison Ave.: A sweetheart of a building is losing an anchor tenant and tripping a mortgage default
Read more >>
2) 126 E. 56th St.: A mortgage that may be worth more than building itself
Read more >>
3) 61 Broadway: If you don’t want to work in a 106-year old office building, maybe you’ll want to live there?
Read more >>
With several recent reports highlighting some of the major challenges facing the Midtown office market, many in the industry are hoping the public acknowledgement will give cover to the buildings in the market that desperately need to reset and revalue their respective valuations.
The days of extend & pretend are over with interest rates nearly doubling along with stagnant occupancy numbers. This double whammy is turning the screws on Landlords and Lenders alike, forcing them to either begin making deals at market rents when possible or hand over the keys.
There will undoubtedly be more pain in the short term (see below), but I believe this is the beginning of a healthy and necessary reckoning for the Midtown office market.
Some of the buildings recently in the news and a quick take:
1) 515 Madison Ave.: A sweetheart of a building is losing an anchor tenant and tripping a mortgage default
Read more >>
2) 126 E. 56th St.: A mortgage that may be worth more than building itself
Read more >>
3) 61 Broadway: If you don’t want to work in a 106-year old office building, maybe you’ll want to live there?
Read more >>
Have you heard about the two next-door neighbors who don’t speak?
16 West 39th: 55,100 SF office building looking for a buyer at $590 PSF
32 West 39th: 74,000 SF office building looking for a buyer at $850 PSF
Finally, what are the big boys are saying?
RXR: Dear Lenders: Here are the keys - take them or work with me
ESRT: We're an office-only Landlord no longer
Vornado: Yeaaa, soooo ummm, we’re down about $600m
Boston Properties: We're in a recession, no diggity
SL Green: Hybrid work may actually be a 'thing'
Until next month,
Ben
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Ben Blumenthal
Principal Broker | Noah & Co.
For the rest of our February 2023 Newsletter, click here.
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