The Bank of England has held off on further interest rate rises for now but agents warn that there is still further for house prices to drop.
The cost of borrowing had been raised for 14 consecutive months between December 2021 and August 2023 from 0.1% to 5.25% in an effort to tackle high inflation.
At the same time, average mortgage pricing has risen above 6%, hitting buyer budgets and pushing house prices down as the market slows.
But inflation has been easing recently, prompting the Bank of England to hold interest rates at its latest meeting yesterday.
The central bank said there were signs that the rate rises were hitting the economy and the labour market.
Commenting on the announcement, Lucian Cook, head of residential research at Savills, said: “The Bank of England’s decision to maintain the current base rate is an important signal to the mortgage markets and should take some of the edge off the affordability pressures buyers are currently facing.
“However, a material improvement in mortgage affordability requires the prospect a cut in interest rates coming onto the horizon. That still looks some way off, suggesting buyers’ budgets are going to remain constrained and that there is a little way to go before house prices bottom out.”
Richard Donnell, executive director of Research at Zoopla, said this will be welcome news to homebuyers.
He added: “There has been some softening in mortgage rates but as long as rates stay over 5% then house prices will continue to fall. The concern is that money markets expect base rates to stay higher for longer in the face of higher inflation which will keep two and five-year fixed-rate mortgage rates higher.
“As we saw this Spring, mortgage rates in the low 4% range would bring buyers back into the market but this would require money markets to expect base rate cuts rather than an ending to further base rate increases.
“Today’s homebuyers and remortgagors are taking what they will hope is short-term pain to get a better, lower, rate in two years’ time with 40% of new mortgages being taken at the higher 2-year fixed rate.”
Nathan Emerson, chief executive of Propertymark, added: “It’s positive to see that the bank rate has remained unchanged this time around and will be reassuring for those looking to enter the housing market especially.
“This now indicates that rises to interest rates have been impactful and that the fall in house prices has helped to even the affordability playing field and keep the wheels of the housing market turning.”
Michael Royce, a three-decade veteran of the real estate industry, has joined Savills as a corporate managing director in its industrial services department based in Tysons, Va., Commercial Observer has learned.
“Savills has a reputation as a top-tier firm, with a roster of professionals who are highly regarded throughout the industry,” Royce told CO. “The opportunity to join Gregg [Healy, executive vice president and head of industrial services] and the industrial services group, to play a role in increasing market share and collaborating with others across the country, it’s all an incredibly exciting opportunity.”
In his new role, which he began Wednesday, Royce will be charged with growing Savills’ industrial market share in the mid-Atlantic region, servicing existing clients and introducing new clients to the tools, technology, research, and consulting that the brokerage has to offer.
“I’m eager to play a leading role in raising awareness for our capabilities, creating new business opportunities and making Savills the go-to firm for our existing clients and prospects,” he said. “I will also be part of our larger push to grow Savills’ industrial presence in North America.”
Royce previously served as executive senior vice president at KLNB, where he worked in the industrial services department in the mid-Atlantic region. Prior to that, he worked at Avison Young, Cassidy Turley, Cushman & Wakefield and Transwestern.
Over his career, Royce has executed more than $3.2 billion and 58.7 million square feet of transaction volume.
This is one of a series of additions to the industrial service’s team for Savills in the past nine months. It acquired an eight-person team in Montreal earlier this year, added supply chain specialist J.C. Renshaw in December of 2022, and expanded the team’s industrial research capabilities under head of industrial research Mark Russo.
Keith Loria can be reached at Kloria@commercialobserver.com.
David Carlos is setting off from Savills after taking a job as head of brokerage services for nonprofit, education and government clients at JLL (JLL), Commercial Observer has learned.
Carlos — who has mainly steered deals with hospitals, universities, nonprofits and religious organizations during his 16-year Savills tenure — is taking his two-person team with him as well: Andrew Dzenis and Rekha Pednekar, according to JLL.
“David is a highly skilled broker whose experience executing complex, multi-dimensional sale and leasing transactions will be a tremendous asset as JLL continues to expand its capabilities in New York and beyond,” Peter Riguardi, president of the New York region for JLL, said in a statement.
Carlos, who started at JLL on Monday, had a client roster at Savills that included Weill Cornell Medicine, Jewish Theological Seminary, City University of New York, New York Public Library and KIPP charter schools.
One notable deal Carlos negotiated was an eight-year, 95,000-square-foot lease in May 2018 for Kroll Bond Rating Agency, which then subleased 26,000 square feet to Lee & Associates NYC. In March, he started work with Arthur Mirante on marketing the former St. John’s University’s Grymes Hill campus on Staten Island for sale.
Carlos started work at Savills around 2007, and Dzenis, an associate, joined the team in 2018 followed by Pednekar, who joined in 2021.
A spokesperson for Savills declined to comment.
Before jumping into brokerage, Carlos attended Cornell University where he studied consumer economics and was captain of its varsity soccer team, as CO previously reported. He briefly played professional soccer for a second-division team in Portugal.
Mark Hallum can be reached at mhallum@commercialobserver.com.
Ambient Enterprises is closing two of its offices in Manhattan, but tripling its total footprint with a 17,000-square-foot sublease at 498 Seventh Avenue, Commercial Observer has learned.
The HVAC design firm will move from a combined 5,000 square feet at both 5 West 19th Street and 20 West 36th Street to 498 Seventh, owned in a joint venture among George Comfort & Sons, Loeb Partners Realty and a South Korean investment firm known as JR AMC, according to subtenant broker Savills.
The sublandlord, the length of the lease and the asking rent was not disclosed, but a recent report from Lee & Associates NYC said the average asking rent in Midtown was about $77 per square foot in the second quarter of 2023.
“We were able to strategically meet Ambient’s needs for more workspace and a more unified setup by placing the company in a fully furnished office with high-end installation,” Savills’ Christopher Foerch, who represented Ambient with Roi Shleifer, Ryan Remington and Jack Bivins, said in a statement.
Andrew Conrad and Matt Coudert of George Comfort & Sons represented the landlord in-house as well as the sublandlord. George Comfort did not immediately respond to a request for comment.
Ambient will move to the 14th floor of the building in November, according to Savills.
The building between West 36th and 37th streets is 25 stories tall, spans960,000 square feet, and recently attracted Securitas Security Services, which signed a 19,500-square-foot lease in April.
Mark Hallum can be reached at mhallum@commercialobserver.com.
It’s the crash that dare not speak its name: the obsolescence of offices across Dublin city. Vacancy in Irish office buildings is set to hit 17 per cent this year, but that headline figure tells only part of the story.
According to Savills’ Dublin Office Market research report, in the first half of 2023, the take-up of office space in Dublin dropped 30 per cent compared with the same period in 2022. Also according to Savills, in the first quarter of 2023, European office take-up fell 14 per cent below the five-year Q1 average.
Dublin’s equivalent drop was 62 per cent. Between Q1 2021 and Q1 2023, the level of office stock in Dublin increased by 8 per cent, but the amount of tenant space available for sublet rose 150 per cent.
In Dublin, “grey space” – surplus office space leased but vacant – accounts for 36 per cent of all available supply. Actual functioning offices are also experiencing vacancy. Back in February, research by Savills and the Dublin Chamber of Commerce showed Dublin office occupancy rates were between zero and 10 per cent on Mondays and Fridays, 51-60 per cent on Tuesdays and Thursdays, peaking at 61-70 per cent occupancy on Wednesdays.
This is not an Irish phenomenon. It’s particularly acute in San Francisco (where vacancy grew from about 4 per cent pre-pandemic to 31.8 per cent now), and Manhattan (22.4 per cent). Office blocks in Manhattan are being offloaded at knock-down prices.
Distressed asset sales in the office market are now mirroring what happened to American malls. Some buildings are selling for less than the value of the land they’re on. A massive office block on Avenue of the Americas last year sold for $320 million (€297 million). In 2006, it was bought for almost $500 million.
The age of buildings is crucial. Contemporary office blocks with massive floor plates, and essentially hermetically sealed by glass, are rarely viable
Like many expensive cities, New York City – where I am writing from – has a housing crisis. The potential for converting office blocks to housing became buzzy during the pandemic. It sounds obvious: a glut of empty office buildings, plus a housing shortage, equals a novel development opportunity. But what does that really look like?
On Water Street in Manhattan’s Financial District, a brutalist 1960s brick building looms. This used to be the headquarters of the New York Daily News and a JPMorgan office. Now, it’s the largest office-to-residential development project in America; 1,300 apartments will be created within it, most with home offices. Building dust from the project merges with the sawdust that spills out from the floor of the Dead Rabbit pub across the street.
A development at 25 Water Street is seen by many as “the model” for this pandemic-induced luxury real estate phenomenon. If developers can make the case for its profitability, surely more will follow.
But it’s not that simple. The age of buildings is crucial. Contemporary office blocks with massive floor plates, and essentially hermetically sealed by glass, are rarely viable. The development at 25 Water Street will scoop out parts of the building to create internal courtyards for light and ventilation. It’s also not necessarily the kind of housing the city needs most acutely. For councilman Justin Brannan, who sponsored a bill that established a taskforce of experts to appraise the viability of conversions, costly conversions mean expensive apartments.
“Where there’s a will there’s a way,” Brannan told me last week, “Architecturally, it can be done. The issue is it’s expensive to do. Ostensibly, any building can be converted into residential, but it might end up costing so much you might be better knocking a building down and building a new one.” From Brannan’s perspective, “the challenge now is how do we incentivise these conversions to produce housing that people can actually afford”.
In Dublin, vacancy rates are also being driven by speculative developments without tenants in place coming on stream. According to a market briefing for investors by Lisney cited by the Business Post, just 29 per cent of office stock currently under construction has been pre-let. The Clerys Quarter development on O’Connell Street is advertising office space on Instagram. The redevelopment of the Central Bank building on Dame Street, Central Plaza, initially cited WeWork as renting nine floors of its building. But WeWork is imploding (again), with Wall Street funds exploring a possible bankruptcy filing.
The reality is, if Manhattan can’t keep its offices afloat, nowhere can. Last month, New York City Mayor Eric Adams announced his intention to produce 20,000 homes within a decade from empty office buildings, saying, “It makes no sense to allow office buildings to sit empty while New Yorkers struggle to find housing.”
Dublin city urgently needs a cohesive strategy to tackle office vacancy. In Park West, an office complex has been converted to social housing. Social housing in industrial estates on Dublin’s outskirts will do little to revitalise city life. Returning Georgian buildings to housing and incentivising companies to leave buildings with conversion potential for new, purpose-built office blocks, and creating affordable housing within older buildings, where practical, makes more sense.
It’s autumn 2023. If office workers were going to return en masse, five days a week, that would be our reality, and it’s not. The last thing Dublin city needs is a commercial property crash. But the figures are telling a story. It looks like one is coming.
A famous bridal wear designer has found a match for a new showroom in Midtown.
Vera Wang signed a 26,708-square-foot lease on the fifth floor and part of the seventh floor at Morgan Stanley Prime Property Fund’s 500 Park Avenue and will relocate from 15 East 26th Street, the New York Post first reported.
The length of the lease and the asking rent were not disclosed, but the average asking rent for Midtown was about $79 per square foot, according to a Colliers report on the second quarter of 2023.
“As a boutique, high-touch asset, 500 Park Avenue remains one of the Plaza District’s statement properties,” JLL (JLL)’s Cynthia Wasserberger, who represented the landlord alongside Frank Doyle and Michael Pallas, said in a statement. “Its elegant and modernist design appealed to the tenant, and the oversized windows hovering above Park Avenue allow for a light-filled working experience that complements the Vera Wang showroom design.”
Jeffrey Peck, Daniel Horowitz, Roi Shleifer and Christopher Foerch of Savills represented Vera Wang in the transaction. Savills declined to comment.
But Vera Wang wasn’t the only one to say “I do” to 500 Fifth. Triva Group, a furniture company based in Porto, Portugal, also signed a 4,614-square-foot lease on the ground floor of the building for interior designer Frato, a brand in its portfolio, to open its first store in the country in the fall.
“Taking advantage of a prime location … Frato has secured a well-positioned corner for their first U.S. showroom,” Peter Weisman of Sinvin Real Estate, who represented Frato, said in a statement. “That Frato is moving into an Art Deco building from the mid-century speaks to a modern sensibility, while holding onto historic roots. Frato’s clean, classic aesthetic incorporates contemporary styles with the highest craftsmanship.”
Gene Spiegelman of Ripco Real Estate represented the landlord with James Ariola and Michael Azarian of Cushman and Wakefield. Ripco and C&W did not immediately respond to requests for comment.
Constructed in 1960, the 11-story building at the corner of Park Avenue and East 59th Street was originally the Pepsi-Cola Building. Current tenants include SLR Capital Partners, The Georgetown Company and Friedland Properties.
Mark Hallum can be reached at mhallum@commercialobserver.com.
A management platform for businesses is moving to 23,623 square feet at CommonWealth Partners’ 441 Ninth Avenue, Commercial Observer has learned.
Sprinklr is turning off the tap at its offices at 29 West 35th Street in a relocation to the entire 12th floor of the building — also known as Hudson Commons — located near Hudson Yards, according to CBRE (CBRE).
Asking rent in the building is $120 per square foot, but the brokerage did not disclose the length of the lease.
“Hudson Commons is one of the city’s newest and most advanced boutique office buildings with tower floors, featuring breathtaking views, high ceilings and exclusive terraces, making it attractive to a diverse mix of tenants and industries,” CBRE’s Evan Haskell, who represented the landlord with Ben Joseph, James Ackerson and Howard Fiddle, said in a statement. “Ownership plans to prebuild an entire tower floor to further augment the unique offerings at 441 Ninth.”
Nick Farmakis and David Goldstein of Savills represented Sprinklr in the transaction.
“441 Ninth Avenue provides a unique combination of modern infrastructure and amenities that will successfully support Sprinklr’s employees, clients and partners,” Farmakis said in a statement.
Located on a full block between West 34th and West 35th streets, Hudson Commons may be more recognizable as the building with the name Peloton emblazoned on the side. The tenant pre-leased 312,000 square feet in 2018 when the property was owned and being developed by Cove Property Group and the Baupost Group.
In December 2021, the 25-story, 697,960-square-foot tower was sold to the current Los Angeles-based landlord for $1.033 billion in what was the largest investment sale by dollar volume since 2019 at the time.
Mark Hallum can be reached at mhallum@commercialobserver.com.
Locust Street Group has inked a 12-year lease at The Herald, the restored former home of the Washington Herald Examiner in Washington, D.C.
The public affairs firm will take 21,500 square feet, spanning the entire 10th floor and half of the ninth floor in the 114,000-square-foot office property. The company is relocating its D.C. offices from 2008 Hillyer Place NW.
Marx Realty acquired the historic building in 2020 for $41 million, which held both the Washington Herald Examiner’s offices and printing presses, to which it owes the 19-foot ceilings on the ground floor. It’s there that Jaqueline Kennedy Onassis started her career as a photographer and reporter.
Located at 1307 New York Avenue, the building was built in 1923 and is known for its Beaux Arts style infused with a luxury hotel sensibility. The building features a new 40-seat boardroom, a European-style cafe and the Bouvier Club, an 8,800-square-foot lounge that incorporates historic photos, curated artwork, newspaper-printing memorabilia and a fireplace.
“The remarkable and prestigious tenant roster at The Herald is a testament to its distinctive hospitality-infused aesthetics, creating an inspiring environment that seamlessly blends modern amenities with the building’s rich historical charm,” Craig Deitelzweig, CEO of Marx Realty, said in a prepared statement.
Locust Street Group was represented by Ken Biberaj and Danielle Ferrari of Savills, while Avison Young’ Will Stern and Eli Barnes handled things for the landlord.
Keith Loria can be reached at Kloria@commercialobserver.com.
A property consultancy has agreed a deal to relocate its Leeds team to a landmark development in the city.
JLL is taking the first floor of 12 Wellington Place office, totalling 10,219 sq ft, and will relocate from elsewhere in the city next year.
The consultancy, which acts act as joint letting agent on the Wellington Place scheme and employs more than 80 people in Leeds, said the move demonstrates its continued commitment to the city and wider Yorkshire market.
The letting also aligns with its ongoing strategy to provide flexible work options as well as sustainable, technologically advanced, inclusive and amenity-rich workplaces.
Tom McWilliams, head of office at JLL in Leeds, said: “JLL is playing a major role in shaping and supporting evolving workplace strategies and we are delighted to be moving to a location that shares our ambitions in how office environments can foster partnership and innovation and develop positive cultures, wellbeing and positive social impact.
“12 Wellington Place offers our colleagues a collaborative and vibrant space, with the opportunity to flex their working habits in line with our clients’ needs. We are really excited about our ongoing commitment to Leeds, Yorkshire and the North.”
11 & 12 Wellington Place were the first outside London to achieve a NABERS Designed Reviewed Target Rating of Five Stars or above, an exemplar system for rating the energy efficiency of buildings both during the construction phase and when in use.
Paul Pavia, head of development at MEPC, the developer and asset manager behind Wellington Place, added: “JLL shares our market leading approach and commitment to sustainable development, community-focused office locations and using urban regeneration to support social value initiatives. We are delighted it has committed its ongoing future in Leeds with us.
“JLL’s move follows on from our recent announcement of a 9,000 sq ft letting at 11 Wellington Place to law firm Hill Dickinson and previous lettings to Lloyds Banking Group and Arup. We look forward to announcing further new arrivals to 11 & 12 Wellington Place as we conclude those lettings. The Wellington Place estate continues to set new standards for sustainable development in the Yorkshire region and beyond.”
JLL and Savills are the joint commercial letting agents on the scheme, with Lyons Thompson Letts (LTL) appointed to market its retail and leisure space.
Proptech firm VTS is picking up some office space from Salesforce at its eponymous Midtown tower.
VTS signed a six-year sublease with Salesforce to take 34,325 square feet at Ivanhoe Cambridge’s 1095 Avenue of the Americas, also known as 3 Bryant Park, according to subtenant broker Savills.
Asking rents in the deal were not disclosed, but Midtown saw an average asking rent of $79.85 in the second quarter of 2023, according to a report from Newmark. The VTS deal was first reported by The Real Deal.
VTS will relocate from 141 West 41st Street to occupy the entire 14th floor of 3 Bryant Park by the fourth quarter of this year. Salesforce, a cloud-based software company based in San Francisco, has leased about 300,000 square feet in the building and had it renamed Salesforce Tower in 2016.
However, times have changed. After a period of rapid growth, Salesforce announced in January it would reduce employees and cut office space spending $450 million to $650 million to reduce its current office footprint — and 10 percent of its staff — but did not disclose at the time what properties it would target.
“After an exhaustive search that included several submarkets, VTS identified 3 Bryant Park, a building in its current neighborhood, and a location that will remain central for all employees, as its new home,” Savills’s Jim Wenk, who represented the subtenant alongside Patrick Heeg of Transwestern and Sam Seiler of JLL (JLL), said in a statement. “VTS took advantage of favorable market conditions to secure an attractive package relative to direct pricing in the asset.”
Sacha Zarba, James Ackerson and Alice Fair of CBRE (CBRE) represented Salesforce in the deal.
CBRE, Transwestern and JLL did not immediately respond to requests for comment.
Mark Hallum can be reached at mhallum@commercialobserver.com.
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