NYC CRE Market Rebounds as Investor Confidence Fuels 63% Spike in Sales

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Good morning. Manhattan's commercial real estate (CRE) market is seeing a strong rebound, with Q3 sales hitting $3.2B, more than doubling from the previous year.

Today’s issue is brought to you by PACE Loan Group—a national lender offering owners non-recourse, long-term, fixed-rate C-PACE financing.

🎙️ Listen Now: In this episode of No Cap by CRE Daily, hosts Jack Stone and Alex Gornik sit down with Aleksandr Gampel, Co-Founder of Cuby, to explore how Cuby is revolutionizing the construction industry.

Market Snapshot

INVESTMENT SALES

TOGETHER WITH PACE LOAN GROUP

Developer demand for C-PACE rises as rates fall

With the recent rate cut, developers are looking to get off the sidelines and ahead of competition, making the next 12-18 months critical for obtaining financing.

Since interest rates first started climbing in March of 2022, over a dozen states have improved or created C-PACE programs, expanding the creative financing tool’s applicability and reach.

C-PACE’s fixed-rate, 30-year amortization period makes it an attractive addition to the capital stack since it applies to new and renovation projects. C-PACE covers HVAC, plumbing, electrical, and other upgrades to make the property more efficient and resilient.

Even with rate cuts, C-PACE is an effective solution to reduce the cost of capital and infuse liquidity into projects.

*Please see the advertising disclosure at the bottom of this newsletter.

• Premium spikes: CRE insurance costs have surged, with premiums rising as much as 50% in storm-prone areas, now making up 8% of apartment building operating expenses, double what they were five years ago.

• Tax breaks unveiled: NYC has revealed its proposed property tax rules for multifamily (485x) and office-to-residential conversions (467m) to address its growing housing crisis.

• Bank loans growing: Despite rising delinquencies and falling occupancy, bank-originated CRE loans rose to $3.9B in Q2 from $3.5B in Q1, but are still 58% below pre-pandemic levels.

• Capitalizing on opportunity: Harrison Street raised $2.5B from investors, expanding the firm’s buying power to over $7B for underperforming real estate assets.

• From underdog to acquired: JLL is acquiring Raise Commercial Real Estate, a San Francisco startup that outpaced larger firms by securing major AI clients like OpenAI.

• Urban oases: A recent RentCafe report ranked the most livable US cities today, and Portland, ME, topped the list, with Lincoln, NE, and Des Moines, IA, rounding out the top three.

• Major acquisition: Sani Group purchased three Manhattan multifamily properties totaling 100 units for $50.5 million, marking a strong investment in a rising market.

• Housing crunch ahead: By 2040, 1M LIHTC-built affordable housing units may be converted to market-rate rents, jeopardizing 350K units in just 5 years.

• Multifamily moves: The Sani Group acquired 100 units across 3 Manhattan properties from Page Management for $50.5M, per Avison Young.

• Landlord expansion: Ares Management Corp. (ARES) will acquire GLP Capital Partners' international arm for $3.7B, doubling its AUM to $96B while targeting industrial and data center assets worldwide.

• Midwest mega deals: Amstar Group acquired several warehouses in Naperville and Romeoville for $106M, among the largest deals in Chicago this year.

• Warehouse wonders: DH Property Holdings sold a 283 KSF warehouse in Philadelphia—leased by TJ Maxx’s parent company (TJX)—to KKR (KKR) for $83.5M.

• Retail royalty: Frasers Group (SPIDF) just acquired £100M+ in UK real estate, including Princesshay Shopping Centre and Fremlin Walk Shopping Centre.

• Kosher grocery delivers: DRA Advisors purchased The Village Square at Golf in South Florida, featuring a kosher grocery store, for $31.1M or around $230 PSF.

• Big buys: Benderson Development purchased the Cypress Trace shopping center in Fort Myers at $144 PSF, adding to its growing portfolio of retail properties.

• Keys to the city: OpenAI continues to lease office space aggressively, signing 1 MSF in San Francisco and 90 KSF in NYC’s SoHo, fueled by $6.6B in funding.

• Striking the right note: Drawbridge Realty acquired a 225.8 KSF office in Santa Monica, fully leased to Universal Music Group (UMGNF), for $185M.

• Doubling down: Harvey, a leading legal AI firm, doubled its office space in Manhattan to 34.1 KSF at 315 Park Ave. S., supported by a $100M Series C investment.

• Prescribing profits: Bain Capital and Evergreen Medical Properties bought a 60 KSF medical office in Lake Oswego, OR, for $14M.

• Fairway fortunes: Golf's popularity is once again on the rise in the US, with CBRE finding that revenues are up at resorts nationwide as 26.6M rounds of golf were played in 2023.

• Debt dilemma: Blueprint Hospitality's San Antonio office-to-hotel conversion is facing foreclosure due to loan defaults and water damage, and a $16.7M lawsuit is at stake.

📈 CHART OF THE DAY

FACT OF THE DAY

Amazon alone occupies over 400 million square feet of industrial space globally, more than the entire office space in downtown Los Angeles.