The commercial building sales market is facing a perfect storm of challenges: from inflation and the new work-from-home normal, to interest rate hikes and a dearth of financing.
Financing issues recently tanked an $855 million deal for the HSBC building at 452 Fifth Ave., across from Bryant Park, which was being marketed by Eastdil Secured.
The buyer, Innovo Property Group, failed to secure backing because the building’s anchor tenant, HSBC, is moving out. Now, the Israeli sellers, PBC USA, may pocket the $35 million deposit.
The disaster of a deal will likely give pause to anyone else putting down a deposit for a building without cash in hand.
“Anything that needs capital or pro-forma work on vacant space, or renewals or needs financing at today’s higher rates — those deals are being re-priced,” said Douglas Harmon, chairman of capital markets at Cushman & Wakefield. “Very high quality, newer assets that are well-leased are still very sought after.”
Harmon is offering a 500,000-square-foot office condominium at 575 Fifth Ave. at pricing expected north of $400 million.

And while investors are still making bullish bids — banking on the long-term recovery of the office market — deal-making has become expensive, despite plenty of cash on the sidelines.
“We’ve been coddled with low interest rates for a long time and if you go from 2% to 3%, or 3% to 5% in mortgage rates, that’s a 60% increase in your payment,” said Andrew Scandalios, co-head of JLL Capital Markets. “A lot of people don’t have that, and it will affect their deals and portfolios.”
Scandalios predicted that both work from home and the migration to better quality space around transit nodes “will change the nature of the office markets.”
“Grand Station is hot again.”
Darcy Stacom, chairman and head of capital markets at CBRE
Earlier this year, 475 Fifth Ave. at 41st Street opposite the Public Library and Bryant Park, was sold through Darcy Stacom, chairman and head of capital markets at CBRE, to RFR for $291 million with half the equity contributed by current tenant Penske Media.
Stacom says “Grand Central is hot again” thanks to the opening of One Vanderbilt and the excitement surrounding the upcoming 1,575-foot-high 175 Park Ave. that will flank Grand Central Terminal’s eastern side with a Hyatt Hotel perched on top.
“[For] leasing brokers, it’s very positive,” Stacom said.
She also marketed the 139,000 square feet of office space above the Puma store at 609 Fifth Ave. for SL Green. It is now in contract for $100.5 million, or $723 per foot.

The newest office building to hit the market, 1330 Sixth Ave., is a bit farther north between West 53rd and 54th streets. Blackstone and RXR have given the sales assignment to Eastdil Secured with a target of $350 million or $658 per foot. Seller RXR spent $400 million in 2010 for the building that had been seized when Harry Macklowe defaulted on debt after paying $498 million in 2007.
Requesting anonymity, one broker said pricing for office buildings is generally spread from $600 to $1,000 per foot depending on the needed leasing and capital improvements.
Due to much lower rents for the retail area negotiated during the pandemic with new tenants Bank United and Aston Martin, 450 Park Ave. is being sold through Stacom to SL Green Realty Corp. for $445 million — compared to sellers Oxford and Crown’s price of $545 million paid in 2014.
In March, the 25,693-square-foot retail space at the base of 1600 Broadway in Times Square — occupied on a long lease by the M&M’s store and two signs (each of which brought in over $1.1 million in rent) — was sold through Harmon from Sherwood Properties to Paramount for $191.5 million.

Diagonally across the street at 30 Times Square, aka 719 Seventh Ave., Eric Anton, senior managing director at Marcus & Millichap, is marketing SL Green’s smaller but vacant newly built 10,040-square-foot retail building. Much of its approximately $60 million value is for the 5.2 million pixels glowing on six signs covering 5,800 square feet of its façade.
All of those deals serve as proof that, despite the mounting challenges in the market, any ripple or pause is seen as an opportunity by those who want an entrée or expansion in the Big Apple at some of the lowest price points in years.
Adelaide Polsinelli, a vice chairman at Compass, is selling a property at 230 W. 72nd St., that she has shown to 20 to 30 smaller developers.
“Ninety percent of the buyers I am working with are new and never bought in New York before and realize it is at a low point for pricing. Smart money is buying, and this is how families build their legacies.”
Adelaide Polsinelli, a vice chairman at Compass
“These buyers come in with fresh eyes,” she said. “Ninety percent of the buyers I am working with are new and never bought in New York before and realize it is at a low point for pricing. Smart money is buying, and this is how families build their legacies.”
A Korean syndicate which was a first time US and New York City buyer, Eugene Asset Management, paid $267 million for the Lyric apartment tower at 255 W. 96th St., which was sold on behalf of Related by Harmon.
“It shows that global capital is still chasing New York City residential, and in this case, out dueling domestic buyers,” said Harmon.
A 49% stake in the new office tower at One Manhattan West was bought by Blackstone in a deal marketed by Harmon’s team on behalf of Brookfield and the Qatar Investment Authority, which revalued it to a whopping $2.85 billion.
Represented by Stacom, Google completed the $2.1 billion purchase of its still-under-construction 1.3 million-square-foot office building at 550 Washington St. in Tribeca near its other new offices on Pier 57.
Yet some properties have been floating in the sales market for much of the pandemic, waiting for pricing to improve or for the owner to refinance.

“We did a lot of valuations and have been advising clients on what to do and when to do it, and I believe that most of what was pulled [from the market] or not launched was because of what is going on in the credit market,” said Scandalios.
Another broker who asked to remain anonymous noted, “Some guys who paid too much are shellshocked and worried more about hanging onto their portfolios and trying not to get swallowed by lenders and aren’t out buying.”
In March, a Court Square Queens development site slated for a 66-story tower was sold with plans and permits in place to Carmel Partners for $176 million through Woody Heller, founding partner of Branton Realty Services. The sellers, Stawski Partners, put footings in to qualify the future 900-plus units for the 421a exemption that ended June 15.
But the lack of a continuing 421a-type tax abatement program has now put the kibosh on outer borough land sales and the construction of rental apartments, said Bob Knakal, co-head of capital markets at JLL. Manhattan land is still trading, he said, but only for new build condominiums.

Although the conversion market that upgraded rentals to condominium or co-op apartments died with the 2019 state law requiring 51% of current tenants to buy their units, outdated office towers destined for residential use are starting to pop up downtown.
Rudin Management is in contract through Eastdil Secured to sell 55 Broad St. to a venture of Silverstein and Metro Loft Management, which has been downtown’s most active converter to rentals.
Similarly, in a direct deal, Metro Loft and Jeff Gural’s GFP Real Estate are in contract to buy 4 New York Plaza aka 25 Water St., a 1 million-square-foot tower that needs more windows to capture its harbor views. The seller, Edge Funds, bought it for $270 million in 2015 and has a $250 million mortgage. Its tenant and former owner, JPMorgan Chase, has been trying to sublease and is bailing when its lease expires in January 2025.
“These are interesting times as assets are getting rebranded, converted and repriced. I expect the second half of the year to have lower transaction volumes than we enjoyed over the same period in 2021.”
Douglas Harmon, chairman of capital markets at Cushman & Wakefield
“You can’t just convert some of these to residential,” advised Polsinelli of some properties, pointing to issues including zoning and regulations that require more exits. “It’s not like a shoo-in where you just turn around and convert it.”
That’s another reason Gov. Hochul signed a law this month that makes it easier to convert hotels to affordable housing by loosening zoning and funding restrictions.
Residential building sales are also buoying the market.
In one of the largest residential sales of the year, the angular connected American Copper Buildings at 636 First Ave. at East 33rd Street were sold for Michael Stern’s JDS and the Baupost Group to Josh Gotlib’s Black Spruce Management for $837 million by Harmon.
Two other residential towers are being sold by Equity Residential. The former Trump Place rental at 140 Riverside Blvd., with 354 units, was sold through Stacom in April for $266 million to Douglas Eisenberg’s A&E Real Estate.
Sources said the ease of that transaction netted A&E, now one of the city’s largest rental owners, an approximately $400 million contract for Equity’s 455-unit 160 Riverside Blvd. Both towers were built by the Trump Organization as 80/20 buildings.
A&E also bought the 1,000-unit, 22-building Cunningham Heights complex in Queens Village for $130 million earlier this year.
Another 80/20 rental tower at 160 Madison Ave. is being offered by JLL for $400 million with the abatement and lower financing running for a few more years. A Bo Concept store is on a renegotiated pandemic rent that will be boosted in four years.
“These are interesting times as assets are getting rebranded, converted and repriced,” Harmon said. “I expect the second half of the year to have lower transaction volumes than we enjoyed over the same period in 2021.”
Zumiez and Skechers Add New Offerings to The Curated Dominant Regional Mall
PHILADELPHIA, June 16, 2022 /PRNewswire/ — PREIT (NYSE: PEI), today announced new additions to Dartmouth Mall, a key property in PREIT’s “Winner Take All” segment — as nearby competing malls have closed.
Comparable store sales continue to exceed the meaningful $600 per square foot milestone, at $604 per square foot, in April. The continued performance of Dartmouth Mall fuels the center of a dynamic tenant mix. The new additions include Zumiez and Skechers, which join an already dynamic and diverse tenant mix including a 21,000-square-foot first-to-portfolio ALDI that opened last fall, as well as Burlington and a recently renovated AMC Theatres.
Zumiez, a leading specialty retailer of apparel and hard goods for skate, snow, surf, and active young lifestyles, has opened a new store at the North Dartmouth, MA property.
Skechers, a lifestyle footwear brand for men, women and kids is set to open a 10,000-square-foot location later this year, marking the retailer’s first location in the PREIT portfolio, demonstrating the Company’s ability to capitalize on the strength of its assets to drive tenant interest.
These latest additions are the only locations for over 20 miles, further solidifying the property’s prominence in the trade area. The property is now 95% leased, and year-to-date traffic through May is up over 50% compared to 2021, further highlighting its status as the dominant enclosed retail center in the region.
“The sales performance of Dartmouth mall and addition of these tenants is a testament to the strategic steps we have taken the past few years to position Dartmouth Mall as a shopping and entertainment destination tailored to best serve the community,” said Joseph F. Coradino, CEO of PREIT. “We’ve seen traffic continue to increase month over month as consumer demand grows.”
About Dartmouth Mall
Dartmouth Mall is a market dominant shopping mall that contains over 60 popular stores like ALDI, Burlington, H&M, Hollister, Victoria’s Secret, PINK, Old Navy, Express, Francesca’s, Bath & Body Works, Macy’s, JCPenney and many others. It’s also an entertainment and dining destination featuring a renovated AMC Theatres with recliners and bar, along with four sit-down restaurants.
About PREIT
PREIT (NYSE:PEI) is a publicly traded real estate investment trust that owns and manages innovative properties developed to be thoughtful, community-centric hubs. PREIT’s robust portfolio of carefully curated, ever-evolving properties generates success for its tenants and meaningful impact for the communities it serves by keenly focusing on five core areas of established and emerging opportunity: multi-family & hotel, health & tech, retail, essentials & grocery and experiential. Located primarily in densely-populated regions, PREIT is a top operator of high quality, purposeful places that serve as one-stop destinations for customers to shop, dine, play and stay. Additional information is available at www.preit.com or on Twitter, Instagram or LinkedIn.
Forward Looking Statements
This press release contains certain forward-looking statements that can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “project,” “intend,” “may” or similar expressions. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts. These forward-looking statements reflect our current expectations and assumptions regarding our business, the economy and other future events and conditions and are based on currently available financial, economic and competitive data and our current business plans. Actual results could vary materially depending on risks, uncertainties and changes in circumstances that may affect our operations, markets, services, prices and other factors as discussed in the Risk Factors section of our other filings with the Securities and Exchange Commission. While we believe our assumptions are reasonable, we caution you against relying on any forward-looking statements as it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the effectiveness of strategies we may employ to address our liquidity and capital resources in the future, our ability to achieve our forecasted revenue and pro forma leverage ratio and generate free cash flow to further reduce our indebtedness; our ability to manage our business through the impacts of the COVID-19 pandemic, a weakening of global economic and financial conditions, changes in governmental regulations and related compliance and litigation costs and the other factors listed in our SEC filings. Additionally, our business might be materially and adversely affected by changes in the retail and real estate industries, including bankruptcies, consolidation and store closings, particularly among anchor tenants; current economic conditions, including consumer confidence and spending levels and supply chain challenges and the impact of the COVID-19 pandemic and the public health and governmental response as well as the corresponding effects on tenant business performance, prospects, solvency and leasing decisions; our inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; our ability to maintain and increase property occupancy, sales and rental rates; increases in operating costs that cannot be passed on to tenants; the effects of online shopping and other uses of technology on our retail tenants; risks related to our development and redevelopment activities, including delays, cost overruns and our inability to reach projected occupancy or rental rates; social unrest and acts of vandalism and violence at malls, including our properties, or at other similar spaces, and the potential effect on traffic and sales; the frequency, severity and impact of extreme weather events at or near our properties; our ability to sell properties that we seek to dispose of or our ability to obtain prices we seek; our substantial debt and the liquidation preference of our preferred shares and our high leverage ratio and our ability to remain in compliance with our financial covenants under our debt facilities; our ability to refinance our existing indebtedness when it matures, on favorable terms or at all; our ability to raise capital, including through sales of properties or interests in properties and through the issuance of equity or equity-related securities if market conditions are favorable; and potential dilution from any capital raising transactions or other equity issuances.
Additional factors that might cause future events, achievements or results to differ materially from those expressed or implied by our forward-looking statements include those discussed herein, and in the sections entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.
Contact:
Heather Crowell
[email protected]
[email protected]
SOURCE PREIT
The pandemic has brought on a new set of unexpected challenges for the Commercial Real Estate Industry. As many employers are urging their staff to head back to the office, they are being met with hesitancy, some reluctancy, and in the worst-case scenario, resignations. The pandemic has re-aligned workplace culture, and employee values, and has shifted the requests for desired amenity spaces.
Prior to the pandemic, popular amenity space requests included various small and large-scale offices and meeting rooms that would be suited to best promote employee collaborations. Whether it was writing on a white board or drawing on a touch-screen television, the goal was to provide a room for employees to brainstorm fresh ideas while promoting company culture. Other tenant build-out requests included game rooms, bleacher seating, event spaces and even a bar in the office, complete with beer on tap. The model was based off a work hard and play hard dynamic that would allow for employees to stay in the office much later than standard office hours, while enjoying spontaneous activities with their co-workers, thus building office morale, and contributing to a thriving culture.
As we emerge from the pandemic, it’s a whole new ball game for building owners and their various amenity spaces. We are currently witnessing a shift in amenity space requests, that, prior to the pandemic, would seem bizarre, unreasonable, and simply out of this world.
“We have found that our clients are particularly focused on designing a workplace that promotes an overall “employee experience” while energizing and exciting employees to return back to the office. In an effort to retain and attract talent, we are seeing a strong focus on buildings that have outdoor spaces including private terraces and shared rooftops as well as appealing retail concepts such as fast casual food halls. – Gabi Koshgarian, Chief Operations Officer, Vicus Partners
To fulfill these new tenant requests, building owners are introducing various perks and amenities ranging from on-site childcare to dry-cleaning pickup and even doggy day care centers. Among other amenity requests we are seeing from our clients are food and beverages on site, fitness centers, golf simulators, movie theaters and podcast recording studios.
Additionally, hoteling desks have become increasingly popular as employers are downsizing the square footage of their offices and embracing a hybrid model. Employees have the ability to select their desk each day as they see fit. The hoteling concept is paired with the need for storage. Locker areas have been becoming increasingly popular for those without a designated desk. These are not your traditional high school lockers; the storage units are often a source of attention as they are all uniquely designed and can be controlled by the employees’ cell phones. The rebalancing of amenity spaces is aimed to cater to the interest of what employees really need, rather than trying to entice them with amenities that they do not view as advantageous in the rapidly changing workplace.
While amenities may not be the golden ticket to bring employees back to the office, they will certainly be an important component to attract and retain talent once the workforce returns on a more permanent basis. When it comes to the future of amenity spaces, building owners should aim to expect the unexpected, take a proactive approach to renovations and consider all unique requests even if they seem far-fetched and in left field. Unique amenity spaces are here to stay, and it is up to us to update the commercial real estate space to meet the needs of new age – the hybrid workplace.
Susan Mello joined Walker & Dunlop, one of the nation’s top commercial real estate finance companies, one year ago in the role of executive vice president and group head of capital markets. Her team consists of 96 originators, dedicated to finding financial solutions across the entire capital stack, for any property type across the nation. With so much happening over the past year, Partner Insights decided to check in with Mello to learn about her key achievements and observations over this time.
Commercial Observer: You’re coming up on your one-year anniversary as head of capital markets for Walker & Dunlop. What are some of the most prominent national trends you’ve seen in the capital markets over the past year?
Susan Mello: There are a number of different trends, but the most striking was the rise of alternative, or non-bank, lenders. If I look at Walker & Dunlop’s funding sources from 2019 to 2021, including the GSEs, HUD, etc., finance companies increased from about 14 percent of our volume to approximately 37 percent. Current trends in 2022 indicate it is even higher, although we are seeing some slowdown in activity over the past 45- 60 days. Another trend has been a pivot to floating-rate versus fixed-rate debt. In 2019, about two-thirds of the debt we placed was fixed rate. In 2021, not surprisingly given the sharp decline in interest rates during the pandemic, it was two-thirds floating-rate, practically the opposite.
What explains the growth of these alternative lenders?
The shift to investor driven lending is the result of more money allocated to commercial real estate, which has become a proxy for fixed-income investing. Declining interest rates put more pressure on fixed-income investors especially those such as pension funds which are concerned about meeting target returns. Investors could pivot into real estate debt in their search for yield without dramatically increasing the risk profile of their investment portfolios.
With so much uncertainty in the market right now plus big movements in Treasuries on an almost daily basis, how is all that affecting how you’re advising clients?
As trusted advisers to our clients, we do not focus solely on the economics, we talk to our clients about what they are trying to achieve and certainty of execution. Whether we are placing debt and/or equity, we know our funding sources and we look to match our clients to financing sources that understand and value the relationship side of the business. In a volatile market environment when it can feel like you’re walking on quicksand, our mission is finding solid ground for our clients. It’s in these uncertain times, when liquidity is less available, that we can really deliver value to our clients.
Given all these factors, which asset class is presenting the greatest opportunities now and why?
For the last couple of years, a lot of capital has been invested in both multifamily and industrial; you could make a broad bet on those sectors and given macro and demographic tailwinds there was not much risk in those investments. While we believe tailwinds will continue to support investment in those sectors, moving forward, investors will look more closely at the properties themselves, as opposed to just the property sector. For instance, our team completed a $34.1 million financing for Xebec in February this year in Chino, Calif., where competition for space is fierce. At the time of closing the region’s average rental rates were up by more than 10 percent over the previous 12 months. That product, location, and sponsorship are still very appealing.
New online retailers and traditional retailers alike continue to lease space to solidify their position in the hierarchy of e-commerce platforms like this 315,320-square-foot, 36-foot clear, Class A industrial building situated on approximately 14 acres in Chino, Calif.
But as greater certainty is required to move forward with deploying capital, we’ll see investors become more discerning about the specific assets in which they are investing, looking for those that provide relative value.
Which is a greater concern in commercial real estate right now, inflationary pressures or rising interest rates?
I don’t believe it is any one thing, it is a confluence of events. Inflationary pressures, brought on at least in part by supply chain issues, have led to the rise in interest rates. Those issues, as well as the geopolitical environment, COVID etc., are causing the tremendous uncertainty we have in the market today. For instance, if you’re a developer, not only are you feeling pressure because of rising costs due to labor and supply constraints, but now you also have interest rates and increased debt costs putting upward pressure on your budget. For sponsors acquiring assets today, unless and until we see cap rates expanding (and we are in certain places/assets) it’s going to be about how much they can push their rent-growth assumptions. With this low cap rate environment for certain asset classes and debt costs increasing, you have negative leverage. To make your deal pencil you often need to rely on hefty rent-growth assumptions, and that’s where there’s pressure, because there’s a question about how long that will last before returning to more normalized growth.
What would you characterize as Walker & Dunlop’s greatest strength compared to its competition?
We are a relatively small company compared to some of our peers, but it’s our ongoing investments in people, brand and technology that have fundamentally changed our competitive positioning within the commercial real estate industry. We deliver a highly personalized experience for our clients while delivering the best-in-class financing execution our clients need and want.
We also have a diverse platform, with a wide variety of solutions, whether from third-party or proprietary capital, as both a lender and an adviser. In 2021 alone, we sourced transactions from more than 350 capital sources. That access and background allows us to be hands-on and creative when it comes to managing complex financial structures for our clients.
Looking back on your first year, what are the Walker & Dunlop achievements and advancements you’re proudest of from the past year?
Although we have had a debt brokerage platform for a number of years, Walker and Dunlop is well known, and has established itself as the premier agency lender in the country, ranked as the No. 1 Fannie Mae lender, and No. 4 with Freddie Mac lending. Our core debt business was dominated in 2020 by our GSE lending, and our capital markets advisory business was down as lenders took stock of the impact of COVID. However, in 2021, GSE lending was down, and our debt advisory business was able to step in and offer financing solutions to our sponsors and ensure liquidity for their assets. We knew we needed to diversify our business, and our ability to pivot and bring the best solutions to our clients was exemplified by our 2021 activity. In terms of our debt advisory business, we grew our transaction volume from about $9 billion in 2020 to $27 billion in 2021.
What prominent trends do you think the capital markets are most likely to see in the year ahead?
I think we will continue to see diverse sources of capital, including more “retail” capital as the distribution channels evolve and reach even more individual investors. Historically, these were the investors who didn’t have access to institutional-quality real estate unless they were investing in public REITs. With the rise of a new class of nontraded REITs and crowdsourcing platforms reaching more of the population, the result is more money flowing into private real estate.
I also think we will continue to see the rise of sub-sectors in the major property sectors such as life science assets or medical office. In residential, it’s not just traditional multifamily anymore, but investors are looking at more niche plays such as manufactured housing, single-family rentals or build for rent (BFR) assets. Our team has been at the forefront of the BFR trend, closing over $2 billion in transaction volume and currently has an active pipeline of $5.6 billion. One such development was recently completed by our Phoenix team arranging $26.3 million in financing for Seneca at Southern Highlands in Las Vegas, with a luxury development scheduled to be finalized in May 2023. The final terms of the loan included a three-year term with interest-only payments at a very competitive rate.
Seneca at Southern Highlands, a 50-unit, luxury build-for-rent community to be constructed in Las Vegas.
As more capital flows into the space from alternative sources, investors will search for enhanced yield which they perceive can be obtained by investing in these less traditional assets.
View more articles on capital markets from coast to coast here.
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Marcus & Millichap, a leading commercial real estate brokerage firm specializing in investment sales, financing, research and advisory services, announced on June 10 the sale of Las Palmas, a 16-unit apartment property located in Tempe.
The asset sold for $3,880,000.
“Located in a rapidly transforming north Tempe location, Las Palmas is poised for sustained desirability, rent growth and neighborhood improvement,” Paul Bay, first vice president investments in Marcus & Millichap’s Phoenix office, said in a statement. “New ownership will have the opportunity to upgrade all units with a luxury plus renovation to capitalize on favorable premiums already proven out in the submarket.”
Bay and Jason Tuvia, senior vice president in the firm’s Encino office, had the exclusive listing to market the property on behalf of the seller, a private investor. Tyler Waller, director with Marcus & Millichap Capital Corporation, was instrumental in securing financing.
“The buyer, an investor out of California, was having issues with financing her acquisition,” stated Waller. “We were able to provide permanent financing and negotiated the interest down to a 3.40% fixed-rate for five years on a 30-year amortization schedule, which is optimal for cashflow.”
Las Palmas is located at 1010-1012 South Smith Road in Tempe.
A roughly 10-acre residential and commercial development has been proposed for land across Dundee Road from Wheeling’s Town Center complex.
Developers with an outfit called Turk Walker Ventures want to put up a six-story, 335-unit apartment building and 49 townhouses at 300 W. Dundee Road. The complex also would have 10,000 square feet of space for retail businesses and other amenities.
Mark Kurensky of Arlington Heights-based HKM Architects spoke to the village board about the proposal Monday at village hall. After his brief presentation, the board informally recommended the developers bring the proposal to the village’s plan commission for review.
“Go get ’em,” Village President Pat Horcher told Kurensky.
In addition to facing Wheeling Town Center, the site is across Northgate Parkway from the Uptown 500 residential complex, which remains under construction but has residents. Like the new proposal, Uptown has six stories of apartments and about 10,500 square feet of space set aside for commercial uses.
“We want to just add to that,” Kurensky said.
The site Kurensky and the developers are eyeing for the new project is mostly undeveloped. A vacant house, an occupied house and a one-story office building are on a portion of the property and will be razed if the project progresses, village officials said.
Some trustees had questions about the proposal following Kurensky’s presentation, but their reaction was positive.
“It’s very exciting,” Trustee Mary Papantos said.
Trustee Mary Krueger suggested the developers try to attract service businesses that would cater to people living in the proposed development and nearby complexes. Krueger also asked if the developers are considering environmentally friendly or energy-saving elements, such as charging stations for electric cars, and Kurensky responded they are.
Questions also were raised about the proposed density of the complex and whether enough green space will remain.
Reinvestment in Calgary, Edmonton and Toronto buildings — to keep them competitive — will be essential even as the office market recovers.Getty Images/iStockphoto
A cluster of office towers along Jasper Avenue was the commercial heart of Edmonton for a quarter of a century. But things have changed recently as new office towers are sprouting around Rogers Place, a few blocks to the north.
When major tenants moved to the newer buildings offering more amenities, some older Class A buildings ended up nearly vacant. In the core, vacancy rates were over 13 per cent before the pandemic and they now stand at around 18 per cent, with older A class buildings as high as 21 per cent.
As available space increases, we’re going to see landlords getting much more competitive to offer compelling rate structures but also investing in their buildings and lobbies.”
— Jon Ramscar, national managing director at CBRE
“We’re seeing a flight to quality, to new products that have state-of-the-art HVAC and mechanical systems, larger floor plates and offer lifestyle and amenity-rich environments and social hubs,” says Mark Hartum, principal with Avison Young in Edmonton. To stay competitive, landlords of older buildings are heavily investing in renovations that add collaborative space.
Flight to quality has gained momentum in cities across Canada in the wake of the pandemic, as tenants want amenities that attract workers accustomed to working from home back to the office, says Jon Ramscar, CBRE national managing director based in Toronto.
With vacancy rates at historic lows prepandemic, he says, landlords had less incentive to make investments in fully leased buildings.
“But as available space increases, we’re going to see landlords getting much more competitive to offer compelling rate structures but also investing in their buildings and lobbies,” he explains.

The 103 Street Centre Edmonton features a new social staircase with main floor lounge.Merle Prosofsky Architectural Photography Ltd.

The kitchen at 2680 Skymark was built on spec by Crown.Crown Realty Partners
“Ventilation and touch-free surfaces are big asks because of the pandemic and most quality buildings have upgraded their filtration and air handling and made access points and fixtures in washrooms touch-free in the past two years,” he says.
But now features as simple as coffee houses and bike-storage facilities for those who commute by bike have become significant differentiators as potential tenants consider an office move.
State-of-the-art technology is essential as tech companies are the drivers of office demand seeking out new Class A buildings across North America, he adds. That’s also increasing demand for buildings to consider environmental, social and governance factors to achieve net zero, which will have a huge impact on future investments.
“The market was so tight for space before the pandemic that everyone could lease space no matter what space you had,” says Scott Watson, managing partner, acquisitions and leasing for Crown Realty Partners, whose portfolio includes 70 office buildings in Toronto and Ottawa. “But today when vacancies are in the high teens in many markets, it’s way more challenging,”
With supply outstripping demand, even normally competitive Toronto is seeing double-digit vacancy rates, he says. “The average tenant looks at four spaces before they commit to an office building. And when you look at the financial core of Toronto, there’s a lot more than four buildings competing. It’s tougher to stand out, so you have to offer unique amenities to be attractive.”
Prebuilding suites is a way to get ahead of the curve, Mr. Watson says, as tenants want fully move-in-ready space. Crown has been building suites on spec in its buildings with efficient layouts and new finishes and app-enabled conference centres.
“We want our office experience to feel fresh and inviting from the moment you enter our building doors to the time you sit down at your workspace,” he adds.
In the past, Crown’s prebuilt suites were seldom larger than 3,000 square feet. But “recently we’ve been increasing those sizes; we have one in construction right now that’s a 21,000-square-foot full floor at a cost of about $1.2-million, in the hopes of attracting a tenant and competing with new spaces that are out there.”
Reinvestment in buildings to keep them competitive will be essential even as the office market recovers, Mr. Hartum says. “The alternative is to compete on price alone, which is not ideal [because] if landlords don’t achieve enough economic rent, the result will be less capital available to reinvest in the building and its systems.
“Long term, this is not a good solution, and forces tenants to shop around and continue to empty out these older buildings. That isn’t healthy for the market as a whole.”
Edmonton landlords have been inventive and invested in rebuilds that are attracting new tenants to vacated buildings, he notes. An example is the 22-storey 103 Street Centre near Jasper, built in 1980. It saw most of its space vacated when Enbridge decided to consolidate its offices in a new building.
To bounce back, AIMCo/Epic Investment Services did a rebuild of 103 Street Centre aimed at the growing tech community in Edmonton. The lobby and second floor were connected by a “social staircase,” with bleacher-like seating for people to sit and have conversations or work on a laptop, along with a flexible presentation space for more than 100 people on the main floor.
Other additions include a conference centre, meeting rooms, tenant lounges, a games room and a kitchen and dining area. It’s been so attractive to new tech clients that the vacancy rate plummeted from 95 per cent to just 22 per cent, “which is still high, but it really has been a substantial turnaround,” Mr. Hartum says.
In another building known as First and Jasper, managed by GWL Realty Advisors, Avison Young has been engaged to handle project management of the main floor of the 20-storey building on Jasper Avenue which housed retail tenants that were struggling.
The space was rebuilt into tenant-focused amenities, including a lobby refresh, fitness and wellness centre, conference and meeting centre, parcel storage and concierge desk, Mr. Hartum says. The building is also pet friendly, which isn’t common in Edmonton, he adds.
The intent is to continue adding new tenants similar to the tech companies that recently joined the building, including Google DeepMind which is opening its first AI research labs outside of Britain.

Crown has been building suites on spec in its buildings with efficient layouts and new finishes and app-enabled conference centres.Crown Realty Partners
Edmonton landlords have been inventive and invested in rebuilds that are attracting new tenants to vacated buildings.Merle Prosofsky Architectural Photography Ltd
Leasing interest picked up significantly across Canada as lockdowns have ended, “but we’re still on hold waiting for a lot of large organizations to commit to their longer-term office plans, whether it be renewing leases, reducing their space needs or even increasing their footprint to accommodate new amenities for the employees or business expansion,” Mr. Ramscar says.
Tenants who may have put space up for sublease during the pandemic are now holding on to it waiting to see how quickly workers return to the office.
“Leasing activity is expected to increase throughout the remainder of the year as occupiers make decisions on their office space,” Mr. Ramscar says, “and we fully anticipate a continued focus on the flight to quality.”
“Our partnership with Metro Fund Inc. represents an opportunity for both companies to grow our operations. Bringing together Metro Fund’s deep relationships, especially in South Florida’s Latino community, and Walker & Dunlop’s industry-leading expertise in CRE lending will lead to more favorable financing options and better deals for our clients,” said Howard Smith, Walker & Dunlop President. “Since founding Metro Fund in 2014, Orlando Diaz has demonstrated his ability to originate quality commercial, construction and multifamily loans through relationships with the local building and development community. Walker & Dunlop is excited to expand Metro Fund’s lending capacity in all facets of CRE, including with Fannie Mae and Freddie Mac.”
Walker & Dunlop originated $49 billion in transactions and financed over $42 billion for multifamily properties in 2021. With one of the strongest networks in the industry, the firm’s 2021 brokered loan originations totaled $30 billion, a 170% increase over 2020.
“Partnering with Walker & Dunlop, the third largest provider of CRE capital in the U.S., will bring marketing and production support, along with a host of new multifamily and commercial lending options to our established builder and investor clientele,” said Orlando Diaz, President of Metro Fund Inc. “As the construction and commercial market continues to flourish, the backing of Walker & Dunlop will solidify Metro Fund’s position as the lender of choice for CRE and multifamily lending in South Florida“
Metro Fund Inc., a Hispanic-owned business established in 2014, is a leading independent mortgage and CRE lender in South Florida with deep ties to the development community in South Florida. Since its inception, Metro Fund has deployed significant amounts of capital for both the residential and commercial market via institutional lenders and private capital.
About Walker & Dunlop
Walker & Dunlop (NYSE: WD) is one of the largest providers of capital to the commercial real estate industry, enabling real estate owners and operators to bring their visions of communities — where Americans live, work, shop and play — to life. The power of our people, premier brand, and industry-leading technology makes us more insightful and valuable to our clients, providing an unmatched experience every step of the way. With over 1,400 employees across every major U.S. market, Walker & Dunlop has consistently been named one of Fortune‘s Great Places to Work® and is committed to making the commercial real estate industry more inclusive and diverse while creating meaningful social, environmental, and economic change in our communities.
SOURCE Walker & Dunlop, Inc.
The world of work is rapidly evolving, and so are the types of office spaces and experiences that people want.
Occupier expectations for secure, amenity-rich and seamless interactions in the workspace have accelerated the need for digital enablement and effective technology strategies in modern real estate.
Creating digitally enabled buildings and spaces often requires engaging with multiple technologies and vendors to achieve the desired outcomes. However, this can result in some level of complexity, especially when done at scale across a portfolio.
Utilizing multiple vendors can lead to disparate systems that can’t communicate, and the potential for increased vulnerability to security threats. Together, these problems can create headaches for building owners and occupiers alike.
“Curating seamless and successful customer experiences at scale with technology is hard when the solutions you have aren’t easily replicable. For example, it would be difficult to manage five or six different vendors across every single building you own or operate. It becomes an operational nightmare,” said James Shannon, chief product and technology officer for essensys, the intelligent digital backbone for commercial real estate.
From a security perspective, using multiple vendors can also leave you vulnerable to risks and breaches. “A security issue can have a compounding effect – a landlord’s security problem quickly becomes their tenants’ security problem, and likely a reputational problem as well. The impact is tenfold or more in a large building or portfolio,” said Shannon.
Ironically, the key to implementing complex technology infrastructure for digital enablement is simplicity – having the right foundation to provide an easy-to-scale system that can deliver the right technology to overcome complex challenges of modern real estate.
Shannon and essensys understand these challenges well. The essensys platform removes the complexity of managing in-building networks to deliver digitally enabled, multi-tenanted and scalable office environments for landlords and flexible space providers. It allows them to offer the highest level of enterprise-grade security certified to the strictest international standards, reduce complexity at scale, and meet evolving tenant needs.
According to Shannon, the first step in solving the issues associated with network complexity is automating the many traditional IT tasks using intelligent network automation. Automated processes simplify network management and monitoring and can drive greater data and analytics, faster move-in speeds, and an overall more compelling proposition for tenants.
“Intelligent network automation, unique to the essensys platform, can counter human error,” Shannon said. “When a tenant moves in with 200 employees, they could need a private network, booking systems and physical access, just to name a few of the digital services. The key is to automate those operational tasks. You don’t want to just rely on a human to create all those users and configure those networks because that doesn’t scale. That’s also where risk comes in.”
If, for example, a landlord has a tenant moving into a building on a certain date, he can input the tenant’s information along with the move-in date, and the essensys platform sets up their network, establishes security, and removes human error from the process completely, creating a seamless experience for tenants.
“For me, it’s about how the essensys platform simplifies the operational complexity,” said Shannon. “A lot of asset managers and landlords have not historically managed large IT teams as part of their roles. However, in today’s modern real estate landscape, they’re having to manage and deliver technology. Leveraging a platform like ours allows them to simplify a very complex area of their business.”
Enabling landlords to evolve with market dynamics such as flexibility and the flight to quality, and even helping to achieve sustainability targets, is why essensys serves as the intelligent digital backbone for so many commercial real estate companies, such as Industrious and Studio by Tishman Speyer.
The essensys platform revolves around the philosophy of
“connect, control and create.” The company’s global private network connects every location with secure enterprise-level connectivity. The unique intelligent network automation in the platform enables control of buildings and spaces, allowing customers to create future-ready real estate by simplifying the conversion of physical space into the digital world.
“We take a holistic approach to our customers’ portfolios,” said Shannon. “We connect their buildings and enable them to control the space and to create seamless experiences for their tenants. The key aspect that makes us unique is that we are providing a central point to automate control over systems, spaces and digital services.”
With these areas holistically handled, the simplicity, security and scalability of intelligent networks ensure that landlords can effectively and strategically digitally enable their portfolios, making their assets future-ready for their occupiers in today’s fast-evolving office sector.
At a time when developers are facing a seemingly endless array of increasing economic challenges — including inflation and deepening supply-chain issues, to name just a few — any tool that eases the burden could be considered crucial. Developers are turning to C-PACE (Commercial Property Assessed Clean Energy) financing, which allows them to lighten the financial load while doing good for the environment. Partner Insights spoke to Andrew Zech, COO of Nuveen Green Capital – a leading C-PACE capital provider — to discuss the advantages of C-PACE financing for developers, and how it can help stave off the worst effects of a challenging economy.
Commercial Observer: What exactly is C-PACE financing, and who is C-PACE financing available to?
Andrew Zech: C-PACE is an innovative financing tool that’s spreading rapidly across the United States. It allows commercial developers and property owners to finance a portion of their construction project through a public/private structure that’s cheaper and more competitively structured than standard construction loans, mezzanine financing, or third-party equity. It’s accessible to any major commercial construction or renovation project in the 30-plus states where C-PACE financing is available.
What is the greatest advantage of C-PACE financing in these times of economic volatility?
C-PACE is compelling in 2022 for a few different reasons. One is that the rate is low, and it’s fixed from construction to term. It’s hard to overstate the importance of locking in a competitive rate when rates are rising as rapidly as they are. C-PACE is also critical because it tends to size down more expensive construction loans, mezz debt, third-party equity or other gap fillers. And so the argument for C-PACE used to be that it could shrink your dependence on double-digit interest-rate gap financing, and that’s certainly true. But increasingly, C-PACE is even priced inside of first mortgage debt. So for a lot of projects, it’s the most competitive form of capital of any kind in a construction project’s capital stack.
Should today’s precarious economic situation be an incentive for developers to find ways to put C-PACE to use?
Yes, absolutely. We’re seeing a challenging confluence of increasing construction costs and financing costs, supply-chain issues that are driving up costs, and the economic uncertainty of what’s going to meet you on the other side of your construction project. All of those are coming together with a wave of developments that no longer pencil with traditional financing. When you’re in a climate like that, any tool that can dramatically cut costs should be on every developer’s menu.
Interest rates are rising. How much of the pain of rising rates can C-PACE offset for developers of both adaptive reuse conversions and new construction?
Since the beginning of the year, the 10-year Treasury has increased by 130 basis points, and SOFR is basically right behind it. For your typical capital stack, C-PACE comes in and decreases the weighted cost of capital by 100 to 200 basis points. So, in a lot of ways, I think about C-PACE like turning back the clock to the financing cost of 2021.
How will the long-term value of a property be affected, especially against factors like inflation, by having used C-PACE financing?
C-PACE is unique in that it can automatically transfer to a property’s next owner upon sale, or the current owner can choose to pay off C-PACE before the sale, or refinance. That’s always been a great free option for developers, but now that free option is even more powerful because in a higher-rate environment, having a captive source of 5 to 6 percent long-term, nonrecourse financing with no fees, no financial covenants, no assumption, and no requirements is very likely going to boost the property value on sale.
Will the upgraded energy-efficient measures developers use C-PACE for have a long-term effect on a building’s value?
Absolutely. C-PACE is used on buildings that have environmental attributes that exceed code standards. Buildings that are more comfortable and environmentally friendly are also more valuable and more sought after in the market. Study after study has confirmed this.
Are there any steps Nuveen Green Capital is taking to help protect their borrowers from all the worsening economic conditions we’ve been discussing?
Yes. Nuveen Green Capital can work with our borrowers to structure the form of the financing to hedge against future volatility. The core structure of C-PACE already helps, because it is long-term, fixed-rate and nonrecourse, which is incredibly important to developers, especially in these financial conditions. But we can also work with developers to structure their rate, fee and terms on the project to best meet their needs.
Some of Nuveen Green Capital’s leaders were involved in developing C-PACE financing. Given this, was C-PACE designed, at least in part, with protection from a worsening economy in mind?
Yes, for sure. When C-PACE was first developed, the great financial crisis wasn’t too far in the rearview mirror. It was critical when designing a big-tent financing program for energy efficiency to make sure that it was designed with future volatility in mind. So a lot of the attributes that I’m describing with C-PACE — that it’s long-term, fixed-rate and nonrecourse, and the ability to transfer on sale — aren’t there by accident. They were intentional.
Should every developer be aware of C-PACE financing, or is it really just for developers in certain situations?
I like to joke with our clients that C-PACE is a great fit for anybody who has a major capital project and a cost of equity that is greater than 6 percent. When you actually look at the market, that is nearly every single development out there.