The jumbo loan backed by Times Square Plaza, an office tower in the heart of Midtown, transferred to special servicing this month for imminent maturity default after its owner failed to lock down new financing.
Longtime landlord The Tamares Group started shopping for debt in January to replace the $365 million loan coming due in October at 1500 Broadway, according to Morningstar Credit.
Manhattan notched 120 contract signings for $428M.
New development sales withered in the July heat, falling below pre-pandemic levels for the second straight month.
While July typically sees less contract activity than its preceding months, last month also fell short in comparison to prior years and pre-pandemic averages. The 217 contract signings was a nearly 14 percent decrease from last year, and a 9 percent drop from the 2015 to 2019 July average, according to Marketproof’s monthly report.
Total deal volume last month was $570 million, with a price per square foot of $1,746. Contrast this with last July’s numbers, with a deal volume at $613 million with a median price per square foot of $1,682.
Midtown is having a moment.
A few big deals boosted the leasing market last month, and the six largest were in Midtown, according to a new Colliers office report.
Leasing volume grew nearly 60 percent from the previous month and surpassed the 2019 (pre-pandemic) monthly average of about 3.5 million square feet.
U.S. office markets are suffering from soaring vacancy rates, a record amount of available sublease space, and rising defaults. But curiously, office rents are holding steady or even climbing.
Average U.S. asking office rents are $35.24 a square foot, compared with $34.92 in the fourth quarter of 2019, according to data firm CoStar Group.
Higher asking prices are a reflection of the seemingly oddball way the commercial real-estate market works. Rents are a critical metric used by lenders and others to determine the value of a property. Owners will do everything they can to avoid cutting them, even if it means keeping space vacant because the rental prices deter prospective tenants.
Landlords who cut rents significantly to fill empty space “would significantly reduce the appraised values of their buildings,” said David Bitner, the head of global research for Newmark Group, a commercial real estate services firm. “This in turn could lead to a covenant default on their loans or at minimum would make it harder for them to refinance.”
Only 4.6 million square feet of office was leased in the first quarter of 2023 and Manhattan ended the quarter with a vacancy rate of 16.1 percent across the 470 million square feet tracked by JLL (JLL), according to the brokerage. That’s after Colliers found a 43 percent decline in leasing in the fourth quarter compared to the same period in 2021.
And Class A trophy properties — which have thrived during this rough leasing market — have started to see some distress.
