Streetwear brand Kith opened a storefront at the base of the Williamsburg, Brooklyn, building that houses its offices.
Kith signed a 12-year lease for 7,120 square feet at 25 Kent Street, adding a storefront to the 57,679-square-foot maker space it has occupied in the building since 2019.
Rubenstein Partners, which owns the property in partnership with Heritage Equity Partners, did not disclose the asking rent, but average asking retail rents in that part of Williamsburg were $188 per square foot in summer 2022, according to the Real Estate Board of New York.
“Kith as a brand embodies the nature of Brooklyn’s ever-growing creative community and fits in seamlessly with the burgeoning scene of artistry and innovation in the Williamsburg neighborhood,” Joe Zuber, regional director at Rubenstein, said in a statement.
Neal Ohm at Newmark represented the landlord in the transaction alongside Caleb Petersen and Michael Cohen, with no broker involved on the tenant side.
“We definitely look at it as a market-changer for Williamsburg, Brooklyn, and this particular trade as well,” Ohm told Commercial Observer. “An interesting thing that happened during COVID — and I think it’s continued post-pandemic — is that if you look at Williamsburg as a whole, as well as a market for fitness, food or convenience, notably, all the food operators that are on North Fourth Street … that location became No. 1 in the city.”
The location will also offer visitors the chance to try the “Kith Treats” cereal bar, which is pretty much what it sounds like. Available at nine out of 12 of Kith’s locations, this bar has frozen foods, desserts, pastries, cereals and a range of fixings that can be mixed in.
In 2019, Kith became the first major tenant to take space at 25 Kent — a combination office-retail-industrial building on the Williamsburg waterfront — to relocate its production, design and “front office” teams from Manhattan.
Other firms have since made moves to the eight-story Williamsburg building, including artificial intelligence development firm Altana which inked a 10-year lease for 20,874 square feet November 2022, CO previously reported.
Mark Hallum can be reached at email@example.com.
Maryland and Virginia might literally be making a federal case out of where to put the FBI’s new headquarters.
The long-awaited decision has officials from both states accusing the other of not playing by the rules. What’s at stake is maybe the most significant relocation of a government agency since the CIA opened its headquarters in McLean, Va., more than six decades ago.
The Federal Bureau of Investigation moved into the J. Edgar Hoover building on D.C.’s Pennsylvania Avenue in 1975. It would outgrow the space by the new century, however, and the building started showing its age. What’s more, fresh security concerns arose in 2001 in the wake of the 9/11 attacks. A search began for a new HQ under the Bush administration and continued under President Barack Obama. President Donald Trump nearly canceled the search, but congressional urging put it back on course in 2022. The Hoover Building was literally falling apart.
The General Services Administration (GSA), which manages and leases federal office property, winnowed down more than 30 potential sites in September to a mere three. These included two proposed Maryland sites: a 61-acre plot of land in Greenbelt co-owned by the state and the Washington Metropolitan Area Transit Authority (WMATA), and the site of the former Landover Mall, which spans 80 acres owned by an affiliate of Lerner Enterprises. Both are in Prince George’s County. The proposed Virginia site is 58 acres of federally owned land that’s the current site of a GSA warehouse in Fairfax County.
While it’s not immediately clear when the GSA will choose a site, there are reports that it could come as soon as the end of March.
It makes sense that the FBI would want to move out of the city and into one of these D.C. suburbs, Newmark’s Tim Lenahan, an executive managing director who co-heads the firm’s federal investor services group, told Commercial Observer.
“I think [this decision to move] is largely driven by the changing security environment that makes securing the facility like the J. Edgar Hoover building in the middle of Downtown D.C. more challenging today and in a post-9/11 world than when it was initially constructed,” Lenahan said.
Other federal agencies such as the CIA in McLean and the National Security Agency just outside of Laurel, Md., are much easier to secure than the current FBI headquarters due to the sprawling campuses they occupy in their more isolated suburban settings.
It’s also fairly obvious why both Maryland and Virginia are angling for the deal. Nabbing the FBI headquarters would be a big boost to a local economy, but there’s also the prestige that would come with having one of the most famous law enforcement agencies in the world based in either of their states.
“It’s bragging rights,” Terry Clower, director of George Mason University’s Center for Regional Analysis and a professor of public policy, told CO. “There’s only a few of the three-letter agencies that you could mention in any room anywhere in the country and [people] would know who you’re talking about, and the FBI is one of them. The FBI has cachet.”
The White House is asking for $3.5 billion for the project, and a shiny new federal government headquarters could lead to hundreds of millions of dollars pouring into a local economy. The FBI would also bring an influx of jobs to whichever of the three proposed locations it chooses — upward of 7,500 jobs potentially.
“[We] rarely talk about being able to have one entity boosting your employment counts by that much. Most of the time, when you have a company coming to town … we’re talking 300, 400 or 500 jobs,” Clower said. “This is by order of magnitude to Amazon.”
What’s even more interesting, he noted, is that due to the nature of their classified work, FBI employees may be less susceptible to the changing patterns of work and therefore occupy their office space more often.
There are some downsides, though. For example, due to being federally owned and operated, the FBI headquarters would not generate any real estate tax revenues for the localities — a much-needed pot of money.
Still, the competition to secure a site has led to some animosity between Virginia and Maryland officials. In recent weeks, delegations from both states have made highly publicized appeals to the GSA and the public explaining why their sites would be the best location for the relocated FBI headquarters.
“[Maryland] is the right choice in terms of timeline and cost. It’s the right choice in terms of transportation,” Maryland Gov. Wes Moore said in early March, moments after he and a number of other lawmakers met with GSA officials. “It’s the right choice in advancing the FBI’s mission, and it’s the right choice on equity.”
The next day, Virginia officials made their appeal after meeting with the GSA.
“We made the case that the Springfield site best meets the criteria,” said U.S. Sen. Tim Kaine of Virginia during a press conference. “The most important is compatibility with the mission of the FBI. This is the nation’s security that we’re talking about. That has to be the primary component. And we believe for dozens of reasons the siting of FBI in close proximity to so many sister agencies who have to work together, not in silos, [makes] the Virginia site so strong.”
At the center of the friction are the criteria that the FBI is using to pick its next location, with Virginia focusing on proximity to the FBI Academy in Quantico, and Maryland highlighting the opportunity to bring economic development to a historically marginalized area.
To determine the best site, the agency is using five different criteria, each carrying different weights. At the top of the list is the unclearly defined “FBI mission requirements,” which constitutes 35 percent of the decision-making weight. That’s followed by transportation access at 25 percent, site development flexibility at 15 percent, promoting sustainability and equity at 15 percent, and finally cost at 10 percent.
It’s how these criteria are defined and how much they are weighed in the decision that has led to some controversy. Within the FBI’s criteria, the proximity to the academy in Quantico is included per a GSA fact sheet. Quantico is in Virginia, therefore the site in Springfield is significantly closer to Quantico than either of the two sites in Maryland.
However, the Maryland delegation argues that weighing the site’s distance to Quantico so heavily is unfair. This particular criteria was only added in late 2022, they say, which was years into the decision-making process.
“The first time Quantico was mentioned as a consideration for siting of this building was in 2022,” U.S. Rep. Steny Hoyer of Maryland said in early March. “I’ve been at this since 2009. … Never was this mentioned as a criteria for where the FBI ought to be sited. [It’s] not transparent because we learned that at the very last minute.”
U.S. Sen. Ben Cardin of Maryland went a step further, asking that the proximity to Quantico be “eliminated” from the FBI’s criteria.
The next day, the Virginia delegation responded. Sen. Kaine noted that the FBI has the right to update its criteria, while fellow Virginia Sen. Mark Warner said the mission of the FBI should be of utmost importance. “It has been stunning to me that some have said maybe the needs of the FBI somehow shouldn’t be considered so highly,” Warner said. “We’re making a 50-year decision for the men and women of the FBI.”
Instead of proximity to Quantico, Maryland officials believe “racial equity” should be weighed more heavily. As noted at the press conference and in a March 7 Washington Post op-ed by Gov. Moore, Prince George’s County is a majority-Black suburb that has historically been less affluent than Fairfax County.
“Each year, the average household income for a Marylander living in Prince George’s County is approximately $40,000 less than that of the average Virginian living across the Potomac River in the Fairfax region,” Moore wrote. “Of the largest 150 counties in the United States, Fairfax County ranks No. 2 in economic mobility, and Prince George’s ranks No. 107. Moving the FBI to Maryland would bring jobs and hope to Prince George’s.”
The delegation also brought up the several executive orders signed by President Joe Biden that focused on equity, while calling on the president directly to weigh in on where to put the new FBI headquarters. In a letter to the president, 12 Maryland lawmakers appealed to Biden by saying this is an “opportunity to right the wrongs of decades of systemic racism and discrimination by our nation’s [marquee] law enforcement agency.” Sen. Warner, while also touting the diversity of Northern Virginia, called this direct appeal to Biden inappropriate.
Clower said this argument about how a federal agency should operate in a more equitable fashion is a valid one. “It certainly comes into play in terms of targeted opportunities and trying to address past wrongs along with certain types of investments and programs,” he said. “But I have not heard that, quite honestly, in terms of the location of a federal agency.”
Currently, the FBI headquarters remains in the J. Edgar Hoover Building. Newmark’s Lenahan noted tht the longer the GSA waits to decide on where to move the bureau, the more challenging the situation will become.
“By waiting, it just increases the … costs of maintaining the J. Edgar Hoover Building,” he said. “There are rising construction costs and shifting and dynamic conditions in financial markets [compared with] when they first contemplated it several years ago. I think for everyone’s sake, it makes a lot of sense for them to be diligent, choose the path forward, and pursue it.”
Until a path is chosen, officials in both Virginia and Maryland will be waiting anxiously to see if it will land in their jurisdiction. Clower did share his prediction on where the new FBI headquarters is headed.
“It will end up in court,” he said.
Kimmeridge is energizing the Meatpacking District with a deal to more than double its footprint at 15 Little West 12th Street, Commercial Observer has learned.
The investment firm, which focuses on the energy sector, inked a 10-year deal for 16,845 square feet on the fourth floor, growing from its 13,335 square feet on the fifth floor of the five-story building between Ninth Avenue and Washington Street, according to a source with knowledge of the deal.
Asking rent was $115 per square foot, the source said.
Kimmeridge first moved into the building in June and will take over the fourth floor from data analytics company Palantir Technologies. The deal brings the building to full occupancy, the source said.
The energy investor subleased its nearby 6,000-square-foot offices at 412 West 15th Street last year to move to 15 Little West 12th Street, according to the source.
Newmark’s Daniel Levine, David Falk and Jason Greenstein brokered the deal for landlord Epic LLC. CBRE’s Ken Rapp and Anthony Dattoma handled it for Kimmeridge.
A spokesperson for Newmark declined to comment. Spokespeople for CBRE, Kimmeridge and the landlord did not immediately respond to requests for comment.
Other tenants at 15 Little West 12th Street include energy drink company Red Bull, which took 17,585 square feet across the third floor last year, and biotechnology company Amyris.
Celia Young can be reached at firstname.lastname@example.org.
A research arm of the United Nations has no plans to leave Midtown East anytime soon.
United Nations University Centre for Policy Research renewed its 4,420-square-foot lease with Sage Realty at 767 Third Avenue for another five years, Commercial Observer has learned. Asking rent was about $70 per square foot, according to a source with knowledge of the deal.
The tenant originally signed for the space in June 2018.
Established in 2014, the Centre for Policy Research describes itself as “an independent think tank within the U.N. system” whose researchers contribute to policy debates through briefings to U.N. forums, according to its website. The center is part of United Nations University, a global policy think tank headquartered in Japan.
Sage, the leasing and management division of the Kaufman Organization, refinanced the 40-story office property near Grand Central in December 2021 with a $123 million debt package from Bank of America that was used to help it shore up previously existing loans and fund capital improvements, CO reported at the time.
The firm then set out on a mission to modernize the features of the 310,000-square-foot building, which was constructed in the 1980s by Mel Kaufman and still serves as the headquarters for the Kaufman Organization.
Michael Lenchner with Sage Realty represented the landlord in-house while Matt Leon of Newmark handled negotiations on behalf of the tenant.
Newmark declined to comment. Sage did not immediately respond to a request for comment.
Mark Hallum can be reached at email@example.com.
The furniture store Rent-A-Center is redecorating in Bushwick, Brooklyn, Commercial Observer has learned.
Rent-A-Center inked a 10-year deal to relocate its store at 299 Knickerbocker Avenue to the adjacent 4,500-square-foot storefront and basement at 301 Knickerbocker Avenue, according to Augenbaum Realty’s Josh Augenbaum, who brokered the deal for landlord Blue Bell.
Asking rent was $45 per square foot for Rent-A-Center’s 2,500 square feet on the ground floor.
Rent-A-Center will replace a 99c & Up store at the base of the four-story residential building between Suydam and Hart streets, and jumped on the space because it was so close to its existing location, Augenbaum said.
“They stayed in the same corridor and same area and demographic that they are familiar with,” Augenbaum said. “At the same time, they get to modernize the store and they get to use their online [website], and combine it with the brick and mortar version to make a more effective and easier shopping experience.”
Newmark’s Barry Fishbach and Young Kim represented the tenant in the deal. Fishbach and Kim did not immediately respond to requests for comment.
Celia Young can be reached at firstname.lastname@example.org.
Public relations firm Joele Frank is leaving its current digs at 622 Third Avenue in favor of 78,353 square feet at Milstein Properties’ 22 Vanderbilt, formerly known as 335 Madison Avenue.
The move represents an expansion of about 18,000 square feet for Joele Frank, which signed a 16-year lease with an asking rent of $95 per square foot, the New York Post first reported. Joele Frank plans to open its new office by the end of the year.
CBRE’s Paul Amrich, Neil King, Sacha Zarba, Jeff Fischer and Meghan Allen negotiated on behalf of Milstein Properties, while Joele Frank was represented by Newmark’s Andrew Sachs and Ben Shapiro.
CBRE did not immediately respond to a request for comment, and Newmark declined to comment.
Milstein Properties acquired the building as the Biltmore Hotel in the early 1980s and transformed it into Bank of America’s New York City headquarters. Over time, Bank of America would relocate to One Bryant Park. Facebook, which also leased space in the property, also vacated after signing a 40,000 square foot lease in 2018.
Since 2018, Micheal Milstein, the son of Howard Milstein, has been overseeing a repositioning effort that may have cost the family firm about $250 million, Commercial Observer previously reported. The first repositioning effort saw the building branded as “The Company Building” before the 22 Vanderbilt name was adopted in late 2022.
Milstein Properties’ rebranding aimed to build off the leasing success of SL Green Realty’s nearby One Vanderbilt, a concept Milstein could possibly be expanding on at an event Wednesday called “Grand Central Reimagined” at which Metropolitan Transportation Authority chairman Janno Lieber is expected to speak.
While just north of 43rd Street from One Vanderbilt, 22 Vanderbilt’s asking rents at $95 are a far cry from the upwards of $300 per square foot that SL Green is asking in its tower. While One Vanderbilt was completely leased before it opened in September 2020, 22 Vanderbilt remains at about 68 percent leased, according to the Post.
Mark Hallum can be reached at email@example.com.
Market chaos be damned.
BentallGreenOak and Slate Property Group have closed $248 million in financing for The Biltmore, their luxury multifamily tower in Midtown West, Commercial Observer can first report.
Affinius Capital — formerly Square Mile Capital — and Clarion Partners provided the loan, while Newmark’s Jordan Roeschlaub, Dustin Stolly, Nick Scribani and Chris Kramer negotiated the transaction.
The Biltmore — at 271 West 47th Street at the corner of 47th Street and Eighth Avenue — comprises 464 residential units atop 47,397 square feet of commercial space.
BGO — previously known as GreenOak — and Slate acquired The Biltmore in November 2018 from the Jack Parker Corporation, paying $280 million, The Real Deal reported. Since then, the new owners have funneled significant dollars into upgrading its units and common areas and updating its amenity package.
Affinius and Clarion’s refi will fund the completion of the renovation while ownership “executes a near-term renewal of the 421a tax abatement,” according to a release.
“We believe that the financing provided by our partners at Affinius and Clarion will allow for ownership to successfully complete strategic upgrades to this iconic asset,” Stolly said
The financing closed Thursday, during one of the most volatile weeks in recent market history.
“The multifamily market in New York City has been a strong performer despite the headwinds over the past few years, and quality assets that offer a mixed-use component remain a top choice for owners,” Roeschlaub said.
The 51-story building sits at the edge of the Theater District in the heart of Midtown West, with higher floors enjoying views of the Hudson River. Amenities include a catering kitchen, a fitness center and a landscaped roof terrace, and residents can try their hand at pingpong and air hockey in the billiards lounge. The building also includes a 61-space parking garage.
.Square Mile Capital changed its name to Affinius Capital after integrating with USAA Real Estate only a week ago. The two investment platforms have partnered with one another for over a decade, and the combined Affinius brand marks the culmination of that history. Now, Affinius is straight out the gate with one of the biggest New York deals to close of late.
The same Newmark team negotiated the acquisition financing for The Biltmore’s purchase in 2018. At the time, the deal marked BGO and Slate’s second big multifamily transaction in Midtown, the other being Oriana at 420 East 54th Street.
Cathy Cunningham can be reached at firstname.lastname@example.org
Two Trees Management’s portfolio in Dumbo, Brooklyn, continues to draw tenants with four new leases, Commercial Observer has learned.
Foundation PR and Invisible North will be sharing the fourth floor at Two Trees’ 55 Washington Street after signing 5,236- and 3,797-square-foot leases, respectively.
Both firms moved into the space March 1, each with five-year leases. Invisible North — an advertising outfit — is relocating from 425 Broadway, according to Two Trees, which did not disclose asking rents in the deals. It’s not clear where Foundation PR is relocating from.
“Location, term flexibility and move-in-ready prebuilts are driving tenants to Two Trees in Dumbo,” Two Trees commercial leasing managing director Alyssa Zahler, who represented the landlord in-house alongside Elizabeth Bueno and Nicole Serras, said in a statement.
“The small and midsize companies we are signing leases with are looking for built space that is close to where they and their employees live, and located in a vibrant neighborhood and building — which is exactly what our portfolio provides,” Zahler said.
Foundation PR was represented by John Moran of Newmark, who declined to comment, while Sam Reznitsky of Miyad Realty negotiated on behalf of Invisible North. Miyad did not immediately respond to a request for comment.
The Rounds, a company that delivers personalized home essentials, also signed a 4,395-square-foot lease and moved into the space Jan. 13, according to Two Trees. The Rounds’ move was a relocation from the WeWork location at 195 Montague Street.
Exposure Communications also recently relocated to 8,672 square feet at 45 Main Street, another Two Trees-owned building in Dumbo, with a March 1 move-in date, CO recently reported.
A landmarked building, 55 Washington Street was built in 1909 and spans nine stories and 337,000 square feet.
Mark Hallum can be reached at email@example.com.
Digital health company b.well Connected Health is opening its first physical office since its launch in 2015 in Baltimore’s Federal Hill neighborhood.
The company has signed an 8,000-square-foot lease at 145 West Ostend Street, a 75,000-square-foot office building developed by Caves Valley Partners in 2017, in Baltimore’s Stadium Square development. The office will house about 45 employees.
“Our company has operated primarily on a virtual basis since its inception and throughout our consistent growth, but we always recognized the importance of establishing a true corporate headquarters space to enhance our cohesiveness and foster our innovative corporate culture,” Alicia Raymond, b.well’s vice president of people and culture, wrote in an email to Commercial Observer. “The COVID pandemic pushed back our plans for several years, but we knew we wanted to make Baltimore our home.”
Founded by Kristen Valdes in 2015, the company offers a tech platform that connects the varied stakeholders in health care, including hospitals, insurance firms and pharmacies, in order to help the end customer.
The Verve Partnership, a Baltimore-based interior architecture and design firm, designed and handled the buildout process for the headquarters, which includes private work spaces, open and closed collaboration space and drop-in workspaces.
“There is considerable energy in the Federal Hill neighborhood, with its eclectic array of shops and restaurants walkable from the building,” Raymond said. “It was also important to lead by example and make a statement by bringing a new corporate headquarters to Baltimore. The City has tremendous amenities to offer, we believe in its future and we want other companies to do the same.”
Savills represented the tenant in the deal, while Newmark represented the landlord.
Keith Loria can be reached at Kloria@commercialobserver.com.
It’s in SoMa, the South of Market Street neighborhood that divides San Francisco diagonally into its more residential and stately north end and its more commercial and grittier south end. Six stories, ground up, with wide windows offering a view beyond the mere streets surrounding it, into the future.
In a national office market depressed over the possibility that hybrid and remote work might make good, old-fashioned urban offices obsolete, the development at 300 Kansas Street may be a little shining beacon signaling safety.
San Francisco in particular could use a ray of hope. Office vacancy there stood at 24.1 percent by the end of 2022, according to Cushman & Wakefield, the highest it’s ever been since the brokerage began tracking it in 1996. A mere 43.5 percent of the Bay Area’s workers have returned to the office on a typical workday, according to security firm Kastle Systems, which tracks swipe-ins. That’s among the lowest of the 10 markets Kastle covers. The only metro areas lower were Philadelphia and nearby San Jose — like San Francisco, a tech-driven market. The national average was 50.1 percent.
In that light, 300 Kansas may be a successful model for commercial real estate in cities post-pandemic: buildings designed to host research and development of the industrial kind. The model certainly appears to be catching on. Last year there were 4.8 million square feet of industrial R&D deliveries in urban areas — a new high, according to statistics compiled by Newmark. That was also more than double 2021’s 2.1 million square feet.
With a market beset by office customers who have learned — some the hard way — that their employees can do their jobs remotely, a premium has been placed on uses that can’t be duplicated someplace other than the office. These are the jobs that, by definition, can be done only at a location designed for the kind of experimentation you would not want to subject your carpet to.
In the case of 300 Kansas, it will even have a 45,000-square-foot research and development area where a tenant can drive cars.
San Francisco is a hotbed for futuristic autonomous vehicles, also known as self-driving cars, a technology that promises to revolutionize the very experience of urban living. Already some investors are buying up parking garages in the hope they can be converted to apartments once driverless vehicles catch on and folks no longer have to consider where to stash their cars when they go downtown.
“We continue to be focused on growth in cities where talent wants to be,” said Ethan McCall, a vice president with Spear Street Capital, which is 300 Kansas’ lead developer. “We are following the evolution of cars as computers on wheels.”
He said Spear Street was attracted to San Francisco’s SoMa neighborhood because it was where tech companies put manufacturing operations in the past. Spear Street declined to disclose the cost of the building. It did say Bank of America is financing its construction.
The perfection of autonomous vehicles depends on the perfection of artificial intelligence, or AI, in which every last movement of fellow vehicles, pedestrians and even animals is anticipated to give the machine a brain that can think as good as and perhaps better than a human’s, and put it in charge. There’s other technology. An image posted by Uber, one of the companies working on autonomous vehicle technology, shows a car with a roof-mounted “lidar” unit. Lidar, or “light detection and ranging,” takes constant 360-degree laser pictures to give a car a complete sense of its surroundings.
All this tech still needs a bit of research and development. Recent stories in The New York Times discuss accidents these vehicles have had, or stalls that tie up whole neighborhoods, as experimental vehicles are set loose on San Francisco’s street grid.
The new building at 300 Kansas topped off in February. It still has no committed tenants, but a spokeswoman for Newmark, the brokerage representing Spear Street, said the topping-off should spur interest. The building is expected to be complete by the fall. And researchers there will be able to grab a drink or a meal, take in the city’s cultural spots and nightclubs, and enjoy a rooftop garden with views of the East Bay hills and Mount Diablo.
“I know the building, certainly,” said Robert Sammons, San Francisco-based senior director of research for Cushman & Wakefield, a rival of Newmark. “If you’re looking at creative, or PDR [production, distribution, repair], or advanced manufacturing, it’s one of the largest and newest projects in the city of San Francisco right now. [It’s] a bit of an outlier so far, as far as flex and R&D use goes, though I think it’s going to be a more important part of the market as the entire office sector readjusts to the new reality, if you will.”
There are a number of similar but smaller operations in the San Francisco areas — one a renovation of an old building — designed to serve the same market, Sammons said. One is occupied by software company Adobe. The building also has robotics labs, he said. Industrial R&D shops tend to be connected largely by Caltrain with colleges and universities such as Stanford and the University of California-Berkeley and UC-San Francisco, as well as Silicon Valley to the south of the city.
Sammons compared research and development, which before was confined to more spacious suburban and rural areas, as comparable to life sciences, a major industry in the Bay Area and in San Diego County, Greater Boston and a handful of other markets like New York and D.C. The appeal is about promoting a use that cannot easily be done at home or in a remote location close to home.
“If you’re in the R&D sphere, if you are creative, you certainly need to be on-site,” he said. “You can’t do life science lab work in your apartment.”
R&D spaces are popping up in urban areas throughout the country, and should get bigger in the months and years ahead, said Larry Gigerich, vice chairman of the Site Selectors’ Guild and founder and executive managing director of Ginovus, an Indiana-based consultancy that specializes in helping industrial companies find places to operate. The desire for uses that can’t be replicated remotely or at home is providing extra impetus, he said.
There’s also the fact that leasing rents and sales prices for office and other commercial properties have dropped due to pandemic-
spurred vacancies as well as, in some cases, oversupply from new construction.
“You start with talent,” Gigerich said. “The quality and availability of talent is a critical site-selection factor. One of the best things that urban areas can do to position themselves is talk about (their) talent. Younger, well-
educated talent, especially before they have families, are domiciled in those areas.”
The approximately $275 million February acquisition by Hyundai, the Korean car company, of 15 Laight Street in Manhattan’s Hudson Square is an example of a city benefiting from a desire by industrial companies to tap into that talent to perfect its vehicles, Gigerich said. Hyundai will also add offices and a showroom, according to Bloomberg, which broke the story.
“That’s a really good example of the fact that these companies are looking at the great talent that’s happening in these urban areas,” he said. “These companies had not done it before because of the price point on the real estate side. I think now too there’s a real awareness that has grown not only with U.S domestic companies, but international companies, of the talent that can be tapped into.”
There should definitely be opportunities to replicate the 300 Kansas experience throughout the country. A February report from Cushman & Wakefield titled “Obsolescence Equals Opportunity” predicted there will be more than 330 million square feet of vacant office space by the end of this decade that can be directly linked to hybrid work. With about half a billion square feet expected to come online by then, there should be some 5.6 billion square feet of offices. With hybrid and remote increasingly the norm, however, there will be a need for only 4.6 billion square feet of office space.
Bob Hess, practice leader and senior principal for Newmark’s global consulting and strategy solutions group, said an idea for a new process can happen anywhere. But taking the idea and developing it probably requires people working together, most likely in an office.
“In a life science environment, you have to be in a lab together,” he said. “There are COOs and heads of scale and strategy — (they) want people in the office, so there’s that culture and energy around that idea to make it happen.”
To Hess, corporations are less interested in whether a location is urban, suburban or rural than whether it has the environment to effectively test a product. He mentioned International Falls, Minn., the coldest place in the 48 contiguous states, where car batteries are tested to make sure they will fire up a car under the most extreme conditions. There is one place about an hour west of International Falls where Bosch, the German multinational engineering and technology company, tests “everything from batteries to braking systems,” said Gigerich.
“Innovation happens anywhere,” Hess said. “Everyone wants to do R&D. It’s not just about an urban environment. It can happen in the suburbs, in different states, countries. It takes a village to take these innovation ideas and get them to the next level, scalability, and to make money. In a downturn, a soft-landing recession, innovation and R&D always picks up.”