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December 2, 2020
Midtown — the epicenter of Manhattan office, retail and hospitality — has seen a stark transformation over the past eight months. The hundreds of thousands of office workers and tourists who used to fill the streets and businesses every day now only trickle down the hallowed corridors of Fifth Avenue, Park Avenue, Madison Avenue and Broadway.
Dozens of boutiques, showrooms and restaurants that paid millions in rent every year have already shuttered in the world’s priciest retail cluster. It will be months before the financial giants, law firms and advertising behemoths that made Midtown office buildings the most valuable real estate in the country tell their workers to come back.
“For the most part in the city, it’s really Midtown that hasn’t recovered yet,” GFP Real Estate Chairman and principal Jeffrey Gural said in an interview Monday. “If you look around, there are parts of the city that are not as empty, it’s really Midtown that is empty.”
The fountain in front of 1251 Sixth Ave., across the street from Radio City Music Hall, usually bustling with people this time of year.
Midtown’s identity hinges on the tenets of society that have been shaken over the past eight months. As the world’s largest office district, it has been hard hit by the sudden shift to working from home. Its retailers, which were propped up by the enormous amount of daily foot traffic its expensive streets received, are bearing the brunt of a steep decline in tourism coupled with the acceleration of the consumer shift to e-commerce. With the loss of business and leisure travelers, many of its hotels have decided to keep their doors closed until the end of the crisis, while others have folded permanently.
Many are hopeful that a vaccine or treatment for the coronavirus will be able to turn things around. But a vaccine will be only the beginning of the area’s recovery.
Starting in the spring or summer, Midtown will need to market itself to a new world on the other side of the crisis, one in which the way people work, shop and travel — which more people have done in Midtown than anywhere else in the U.S. for years — could be changed forever.
“The recovery of Midtown certainly is a challenge, one of the biggest challenges for New York’s recovery,” said Ethan Kent, executive director of PlacemakingX, a New York-based global public space planning and development nonprofit.
A reinvented Midtown could have less car congestion along major streets, expanded outdoor public space, microbreweries or mini-logistics delivery centers where retail storefronts used to be, affordable housing in buildings that are currently hotels and amenitized office spaces with outdoor fire pits to lure in employers that now have the option of keeping their staff working from home, a variety of land use experts, public space advocates, market researchers and property owners told Bisnow over the past two weeks.
“I think there is both an interior space question and then a new development question,” said urban planner Mitch Korbey, partner and chair of the Land Use & Zoning Group at Herrick Feinstein. “Those two things have to come together. … I think there will be a premium and emphasis on open space.”
When approaching new development and reimagined use of space in Midtown in the future, the city needs to incentivize the rethinking of interior architecture, underground space, pedestrian flow and public urban plazas in order to ensure a future where the city keeps pace with peers of its size and influence on the global stage, he said.
“We need to recognize that our city needs to be competitive with other cities,” Korbey said. “We have to be able to compare ourselves to cities in China, in Japan … to cities like London.”
The pandemic may have opened a door to create positive evolution in Midtown, but it could close soon after the pandemic ends as well, Kent said.
“We have to think of the emptiness of it all as an opportunity to allow people to use their creativity to reinvent this, there’s a short window to this,” he said. “It’s sort of a race, in a way, to create places that bring people, not tourists, but locals back into the area.”
A Season To Forget
The holiday season has descended, but time in Midtown seems like it stopped in March when New York first shut down. Around Rockefeller Center, Silver Bells and other holiday classics are piped in through a speaker. The echoes of the song bounce off Fifth Avenue, which would typically be filled with the sounds of tourists, locals and office workers looking to find the perfect gift in time for the holidays or take selfies in front of one of New York’s iconic emblems.
An estimated 125 million people typically pile in to see the Christmas Tree at Rockefeller Center each year. The plaza on 50th Street between Fifth and Sixth avenues overlooking the tree and rink is usually so packed this time of year that it’s nearly impossible for a tree-watcher not to bump shoulders with the stranger grabbing a photo of the tree beside them.
This year, in the evenings when the tree is at its most brilliant, it’s easy to maintain more than the 6 feet of distance between the spectators.
Rockefeller Center in early December 2020.
While retailers like Forever 21 in Times Square or the American Girl Store at 75 Rockefeller Plaza have been open since June, the quintessential New York City experience in Midtown stands still. Scores of posters for Broadway musicals, movies and TV shows advertising premiere dates for spring and summer 2020 still adorn the marquees and billboards of Times Square, frozen in time. The buzz from the throngs of people, taxis and performers has been replaced by piped-in holiday music.
The buildings that house the traditional Midtown tourist and office hubs are still standing, but the reality of the space is different. On sunny days this fall, key landmarks such as Grand Central Terminal, Bryant Park and St. Patrick’s Cathedral host a fraction of their usual barrage of office workers and tourists elbowing each other to try and get to the next experience or meeting. On rainy days, one of the world’s biggest urban attractions feels like a ghost town
Hotels in the area, which were beneficiaries of the city’s over 65 million touristsand millions more business travelers annually, have taken the hardest immediate hit. The Roosevelt Hotel, The Times Square Hilton and the Courtyard by Marriot in Herald Square have closed their doors permanently, and an estimated 20% of hotel rooms citywide are predicted to never reopen.
Meanwhile, swaths of retailers are filing for bankruptcy as retail rents along the area’s priciest strips plummet.
Beyond the tourist-driven business, the Midtown that was the world’s foremost office district has taken a punch to the chin. In the third quarter of this year, Midtown office tenants added 9M SF of sublease space to the market, more than those in Midtown South and Lower Manhattan, according to Savills.
Next to the skyscraper-dominated heart of Midtown, on side streets in neighborhoods like Murray Hill, Koreatown, Hell’s Kitchen and the Flatiron District, outdoor restaurants were some of the few rays of light. This summer, when outdoor dining began, restaurants showed their personalities, furnishing their new Parisian setups with in-season blooms from local florists. Into the unseasonably warm autumn, some Midtown restaurants had to turn customers away because waitlists for their outdoor tables were too long.
These same restaurants have built huts and igloos, decorated with evergreens and sleigh bells, with signs boasting their heated seating and holiday menus. Their creativity has inspired hope for the recovery ahead.
“Outdoor dining is really compelling,” L&L Holding Co. Managing Director David Orowitz said. ”It brings people out, so COVID or not, that is here to stay.”
The pandemic has sped up everything from the work-from-home movement to the so-called death of retail to pain in an already oversupplied hotel market, sources say.
“COVID has really just exacerbated existing trends,” real estate advisory firm HR&A Advisors principal Sulin Carling said.
While companies are expected to come back to the office eventually, it will be different. Nearly 1 of every 5 workers can work completely remotely, a report from the World Economic Forum released this week shows, and after the pandemic, work-from-home is set to continue, most likely in a hybrid way, with most workers spending two to three days in the office.
Some 38% of 800 corporate leaders in a McKinsey & Co. survey said they are planning on decreasing the number of required days in the office by one or two, the World Economic Forum report showed. Another 19% said they planned on decreasing the number of required days in the office to three or more. Even when office workers do come back, Midtown’s daily crush of office-related traffic could never recover its pre-pandemic form.
Office will not be the only asset class permanently changed. With tourism not set to rebound to pre-pandemic rates until 2025, hotels face a long recovery ahead of them. Brick-and-mortar retail, which has been a cash cow in Midtown, seems to be in a state of permanent decline.
In order to survive in a new world, the No. 1 office market in the country must evolve if it hopes to maintain its crown.
‘A Wonderful Canvas’ For A Post-Pandemic New York
Urban planners, when asked what a reinvented Midtown should look like, imagine a place where side streets are filled less with cars and more with colorful café seating, where a microbrewery sits on Fifth Avenue next to a logistics center where cyclists pick up e-commerce packages for delivery, where shuttered hotels are turned into affordable housing and an elevated green streetscape runs over Park Avenue.
To more immediately address the area’s issues of vitality, office landlords need to infuse hospitality into their offices and amenitize their spaces to attract tenants and prove to employers that the office can provide something that working from home just can’t, Marx Realty CEO Craig Deitelzweig said. Marx owns the 430K SF office and retail building at 10 Grand Central and the 130K SF office building at 545 Madison Ave.
Fifth Avenue in Midtown in December 2020.
Deitelzweig paints a picture of an office building where plants and greenery overflow into public areas and plazas, making the area warm and inviting for workers to come to every day. In one of his buildings, he installed a fire pit on a terrace that he said is incredibly popular among the workers who are still coming in.
“Unfortunately some of the public space that has come to the market recently has been kind of sterile,” he said. “I think people now more than ever are looking to provide warmth to their environment … the Central Parks of the world, the Bryant Parks of the world, that’s the kind of environment people are looking for.”
While he believes that Midtown will come back strong because of its transportation hubs in Grand Central and Penn Station, he also thinks office landlords who don’t adjust to a new reality will slip through the cracks.
“I do think there are haves and have-nots,” he said. “And the buildings that are not adapting will have to go back to their lenders.”
Deitelzweig also believes that the rollback on regulations for outdoor dining is an opportunity to elevate the city to new heights.
“I think this winter, New York City has the opportunity to look like Aspen,” he said.
Winston Fisher, partner at Fisher Brothers — which owns Midtown office buildings such as 1345 Sixth Ave., Park Avenue Plaza and 299 Park Ave. — said Midtown could differentiate itself globally as an art-infused office district by investing in public art and community infrastructure, which his company had already done pre-pandemic.
“Now more than ever, we’ve wanted to help Midtown be attractive for all types of tenants,” Fisher said. “I think New York is a wonderful city and I think people are going to come back, but we do need some creativity … I think that Midtown is a wonderful canvas for these types of experiences to happen.”
Fisher Brothers hosted a movement art performance in the lobby of one of its buildings, something that drew interest from its tenants, Fisher said. In 2018, Fisher Brothers hosted a competition that solicited designers for plans for an elevated public walkway and greenscape over Park Avenue in Midtown. The developer dubbed the proposal “Center Line,” an homage to the West Side’s High Line. The proposals envisioned a basketball court, waterfall and cubic art exhibit, according to Dezeen.
Out of the 150 entries the competition received from urban planners, students and others, 17 were shortlisted.
Fisher said he hopes the city takes up and funds the winning idea post-pandemic, because the convergence of public art and Midtown’s work culture could help ensure its comeback.
“You want to show employees you can work from home, but the office can be even more exciting … you want to make it fun and interesting,” he said. “We could lean again deep into the art community to create increasing streetscapes.”
Rockefeller Group, which owns 1271 and 1221 Sixth Ave. across the street from Rockefeller Center, is also looking to renovate its office spaces to bring them into a new work era for Midtown.
“Work-from-home, in some form or fashion, is here to stay,” Rockefeller Group Executive Vice President for Core Holdings Bill Edwards said. “For us, we’re trying to take the approach of how we’d identify places we can amentitize the space so that it makes it a more difficult decision to work from home.”
The developer said that it was finishing up renovations at 1271 Sixth and scoping out where it could add more amenities to its buildings. With a retail vacancy at 1221 Sixth, the developer is looking to pivot the space for public use.
“Part of that project is to create that public space,” Edwards said. “The question we ask is how to activate that space for the public, especially the renovation of that plaza.”
Public space is a key element of the future of the area. This was in part propelled by the burgeoning and popular outdoor dining scene, said Kent, the urban planner.
Bryant Park during December 2020. Typically the park is crowded with guests shopping at the park’s outdoor Holiday Shops.
The public fervor for this kind of public space creates a unique opportunity for the city and stakeholders, he said.
“There’s an opportunity to bring locals to a few key places, there are people who want to connect with the heart of their city,” Kent said.
Kent said the city should restrict the number of cars on the widest streets in Midtown so that street vendors and restaurants could serve pedestrians better and bikers could more safely get around the area.
He suggested capping traffic to a maximum of two lanes along avenues in Midtown and removing parking. The city could also create expanded protected bike lanes as well as commercial drop-off zones, he said. Urban planners at the Regional Plan Association have proposed a plan that would create 425 miles of protected bike lanes throughout the city.
Kent also believes that these public spaces will help attract workers back to the city, he said.
“The future of work is increasingly in shared space,” he said.
As for retail, HR&A Advisors’ Carling, who previously worked for the City Planning Commission, said Midtown’s future ground floors should more closely mirror the consumer demands of the day.
Enormous retail spaces could be repositioned into micro-distribution centers or hubs, such as an Amazon locker, where delivery associates on bikes could pick up packages to deliver across the city. Makerspaces — such as microbreweries, apparel manufacturing and other small mixed-use manufacturers — could take up ground-floor retail where big-box retailers currently are. Ghost kitchens are also likely to proliferate.
“I think it’s going to require, on the landlord’s side, some creativity around how we fill those spaces,” Carling said. “The other half of the equation will be put around centralized planning.”
The city could rezone the area so that apartments would line side streets instead of ground-floor retail, she said.
Landlords will have to pivot and adjust prices to meet the new reality for retail, Rudin Management Co. Chairman and CEO Bill Rudin said.
“Owners are going to have to be realistic about what the value is in these spaces, work with the tenant or be aggressive to attract new tenants,” he said.
While tourists will return to hotels, the hospitality market will be a lot different. Hotels need to make people feel safe again, LW Hospitality Advisors President and CEO Daniel Lesser said. This may include new technology such as touchless check-ins and other ways to mitigate the spread of germs.
The hotel market in the area was already oversupplied before the pandemic, so an obliteration of demand entirely has put the final nail in the coffin for many. An estimated 20% of the city’s hotel rooms won’t reopen, which would leave a lot of empty space throughout Midtown.
Beyond increased public space, repositioning, redevelopment and creative office renovations, the future of Midtown relies most heavily on New York City’s economy on the whole. The city needs federal assistance to close budget holes and continue its quality of life to retain and attract residents, the lifeblood of the city, experts said.
“Manhattan is an island, and Midtown is part of that island,” Lesser said. “If the rest of the island doesn’t come back, I don’t know how Midtown does.”
Construction Underway on Marx Realty’s $41M Hospitality-Themed Repositioning at The Herald Building in Washington, DC
New Renderings Reveal a Building of ‘Firsts’ with Soaring Ceilings, Luxe Lounge Space and Historic Touches Reminiscent of Storied Past
Marx Realty (MNPP), a New York-based owner, developer and manager of office, retail and multifamily property across the United States, announced that construction is underway at The Herald building in Washington, DC. The firm has begun a $41 million transformation that will bring a first-of-its-kind hospitality-infused aesthetic to the Washington, DC office market. The significant upgrades will combine form and function as well as health and wellness. Asking rents will be in the $60-74 psf range and construction is expected to be complete in early Spring 2021. Marx Realty acquired the 114,000-square-foot building in April 2020 and is seeing strong demand from Fortune 500 companies, associations and various technology firms, among others.
“It’s exciting to see the new face of The Herald come to life as construction begins in earnest,” said Craig Deitelzweig, president and CEO of Marx Realty. “Our reputation for having pioneered a hospitality-infused ambiance in office buildings is well-known and we’re seeing significant interest from a variety of high-profile tenants seeking a modern office space with a top-to-bottom sensory experience. The Herald will bring a new brand of workspace to the DC market with meaningful updates designed to pay homage to the building’s incredible ceiling heights and past life as home to the Washington Herald’s printing and office operations.”
The Herald was built in 1923 in a Beaux Arts style and is the former home of the printing presses and offices of the Washington Herald Examiner, where Jacqueline Kennedy Onassis (then Bouvier) once worked as the “Inquiring Camera Girl,” both as a photographer and reporter. Marx Realty will build on the historic elements of the building, including an updated entry portal with an intimate foyer that opens to an expansive lobby with a striking floor-to-ceiling copper and glass wall inspired by traditional linotype printing machines.
A uniformed doorman will attend the oversized wooden entry doors in another nod to the hospitality aesthetic as the entry, foyer and lobby come together to effectively blur the lines between a commercial office asset with wellness undertones and a luxury hotel product with a welcoming vibe. The lobby space will boast walnut wood and copper accents, ample seating areas and soaring 22-foot ceilings. Tenants and guests will be welcomed with mood music and Marx Realty’s signature scent infused throughout the building– a sensory experience similar to the world’s finest hotel properties.
“This building and its one-of-a-kind hospitality aesthetic will represent a new benchmark for office buildings in the DC market,” continued Deitelzweig. “It will translate the rich and important history of The Herald to a warm and welcoming workspace ideal for current and future generations of office tenants in governmental affairs, media, technology and financial services. The incredible ceiling heights are unheard of in this market and will serve as a significant differentiator at The Herald as tenants continue their return to the office.”
The level of detail is stylish and functional at every turn. A 40-seat board room and well-appointed 8,800-square-foot Bouvier Lounge on the ground floor, adjacent to the European style cafe will round out a total package of hotel-like ambiance giving tenants an inspirational experience from the time they enter and throughout their entire day. From historic photos, curated artwork and newspaper printing memorabilia to the brass and copper elements, a cafe and a fireplace, the club floor combines contemporary style with the building’s storied past. The seating spaces feature velvet banquettes with antimicrobial properties while a café with outdoor seating gives tenants and guests an al fresco option.
The fitness center — Press Fitness – will feature boxing, private workout rooms with individual pelotons and Mirror fitness system, and an overall aesthetic that combines classic and contemporary touches and speaks to the building’s rich history. The doorman and club floor personnel will work in tandem to reduce the need for tenants and visitors to come in contact with surfaces. Marx Realty’s proprietary Marx Connect software interface will be implemented in order to minimize physical interaction and offer every convenience through a touch of your phone.
This project represents the next installment of the successful collaboration between Marx Realty and David Burns of Studios Architecture, continuing the hospitality-meets-office repositioning success at 10 Grand Central and 545 Madison Avenue, both in New York City.
Marx Realty Breaks Ground on $41M Redevelopment of Hospitality-Themed Office Building in D.C.
The Herald will feature historical art throughout the property, including an ode to Jacqueline Kennedy Onassis (then Jacqueline Bouvier), who worked at the Washington Herald Examiner as a photographer and reporter.
WASHINGTON, D.C. — Marx Realty has broken ground on The Herald, a 114,000-square-foot office building in Washington, D.C. The New York-based developer is investing $41 million to redevelop the property into a hospitality-themed office building. The lobby will feature 22-foot ceilings, a doorman, European-style café, 8,800-square-foot lounge, a fitness center, historical art and several seating areas, similar to a hotel lobby. The asset was originally built in 1923 as the printing press and offices for the Washington Herald Examiner. Marx Realty will update the entrance to the lobby to include floor-to-ceiling copper and glass walls inspired by linotype printing machines. Marx Realty expects construction to be completed in the spring. David Burns of Studios Architecture designed the asset.
This renovated D.C. office building will feature an old-school hands-free technology: a doorman
Commercial real estate owners are increasingly looking to harness touch-free technology for their office tenants to help slow the spread of Covid-19, and Marx Realty is no exception.
Well, maybe a slight exception when it comes to who’s doing the touching. The New York-based commercial real estate firm has kicked off a $41 million renovation to the former Washington Herald Examiner building at 1307 New York Ave. NW after acquiring it earlier in 2020. The finished product will include plenty of technology and other improvements to keep the virus from spreading via high-touch surfaces such as door handles or elevator buttons. But it is also turning to an older form of touch-free service many commercial real estate owners shifted away from years ago: a uniformed doorman. In addition to the doorman to greet visitors and tenants, the building will feature curated mood music, oak wood flooring, even a specialized scent infused into the building’s common areas through the duct work. In marketing materials, the developer boasts The Herald will be a “hospitality-infused office like no other.” The pandemic has accelerated many commercial real estate trends that were already in the works previously, including a shift toward hospitality and the need for building owners to create spaces that will stand out from the crowd. Craig Deitelzweig, president and CEO of Marx, hopes to do that by creating the sort of environment that makes employees want to come back into the office again after months of working from home.
“I think that’s what it takes to bring people back to work,” Deitelzweig said. “All of it is geared toward making you feel good and that going to work is more like checking into a hotel. It will look very much like a hotel. It will also have a real D.C. sensibility to it, with walnut, velvet, fluted columns, and real wood floors in a herringbone pattern.”
Deitelzweig joined Marx in 2017 after heading up the office division for another high-end New York landlord, Rockrose, which sought to elevate the bar with projects like its renovations to 1776 Eye St. NW. He is bullish on the future of office and believes that, after months of working remotely, many employees are itching to get back to work once conditions permit their safe return. Marx retained Studios Architecture to help create those conditions at The Herald, which will include features like individual exercise rooms with antimicrobial bronze paneling and mirrors to ensure people feel comfortable using common area amenities like the fitness center. Other amenities will include The Boardroom, a walnut-paneled meeting room with seating for 30, and the Bouvier Club, a club floor featuring an outdoor, European-style patio and a cafe, among other things. The club floor is named after Jacqueline Bouvier, who was known as “the Inquiring Camera Girl” at the Herald long before she became First Lady Jacqueline Kennedy. The building, which includes plenty of other nods to its newspapering heritage, is slated to deliver in April. Deitelzweig declined to disclose the building’s asking rental rate but said it will likely not be the cheapest option for tenants seeking office space in the District. Marx has retained a JLL leasing team including Doug Mueller, Evan Behr and Nathan Beach to market the space to prospective tenants. Marx faces plenty of competition for those tenants, with D.C.’s office vacancy rate in record-setting territory, but Deitelzweig believes The Herald’s amenities and design by Studios Architecture principal David Burns will help set it apart from the competition.
“I think it is competitive, but for us, what we’re delivering is so unique there really isn’t a whole lot of competition for the space we’re delivering,” he said. “That’s what you have to do in this environment, is really be distinct.”
BY REBECCA BAIRD-REMBA NOVEMBER 13, 2020
When Thor Equities defaulted on its ground lease at 545 Madison Avenue last year and Marx Realty took over the building, the new landlord decided the 17-story office property could use some modern updates.
Marx CEO Craig Deitelzweig said that the glassy 1950s tower “used to have lots of sharp edges. Now there are rounded edges — rounded edges for archways, a rounded library, three rounded seating areas and a touchless cappuccino maker” in the lobby.
The entrance and lobby are being renovated in a midcentury style, much like Marx’s 10 Grand Central. The walls will be reclad in walnut wood with bronze accents, complete with what Deitelzweig calls “sexy lighting” and a reception desk made of emerald quartzite that will be lit from behind.
Even the lobby doors will be rounded and oversized “so they’re dramatic,” said Deitelzweig. The furniture will have rounded edges as well, with velvet couches in midcentury pinks and greens. Other accents include a blackened concrete wall and a bronzed mirror. There will also be fruit-infused water, jazzy music and Marx Realty’s “signature scent.”
Upstairs, Marx is doing 20,000 square feet of prebuilt office suites on the third and 14th floors. The aesthetic will be similar to the lobby, with arched seating areas carved out of dark wood, midcentury furniture in bright colors, and kitchenettes outfitted with dark wood cabinetry. The 10th floor is also up for lease. Asking rents in the building range from $80 to $100 per square foot.
The bathrooms and elevators will be revamped with a midcentury modern style, too, with bronze and grey and walnut woods. Entering the building and calling the elevators will be touchless, thanks to Marx’s in-house app. One of the doormen will be responsible for pushing the elevator buttons, rather than building tenants.
“What’s nice about bronze is that it’s antimicrobial, and all the touch points in the building are bronze,” Deitelzweig said.
Construction started last month, and is expected to wrap in February.
Ultimately, “we want everyone to feel safe and like they’re cocooned in safety and velvet and soft textures,” he said. “We want everyone to feel like they’re in a hotel.”
BREATHING NEW LIFE INTO DYING HOTELS With the industry on the ropes, investors are brainstorming ways to repurpose the now-empty buildings
BY NATALIE SACHMECHI
Craig Deitelzweig made his mark in real estate by buying office buildings and making them look and feel like hotels. “Why shouldn’t you feel like you’re on vacation when you’re at work?” he asks. His redevelopment of the offices at 10 Grand Central is evocative of a chic, boutique hotel with a signature scent pumping through its ducts. He’s done this at properties around the city, but now that tourism is in tatters and hotels sit empty and in danger of default, the chief executive of Marx Realty is looking at a new strategy: buy up cheap hotels and turn them into offices.
As a result of the pandemic, not all of the city’s 700 hotels will make it, and some 25% are expected to close by 2023, experts say.
“Anybody who is in the market today is looking for ways to make sense of it,” said Woody Heller a cohead of the capital markets division at Savills. In some cases, he said, conversions make the most sense.
Rooms for rent
At the low point earlier this year, hotels could fill only 15% of the city’s roughly 128,000 rooms, according to analytics firm STR. The number of rentable rooms has dropped by a third since then to 85,000 now that more than 100 hotels have shuttered temporarily. The Roosevelt, the Marriott East Side, the AKA Wall Street and a consortium of Times Square hotels are among those that have closed permanently.
More than 60 others have offered their space for alternative use on a temporary basis, including the Upper West Side’s Lucerne Hotel, which is housing homeless people and is at the center of a hot debate between neighborhood residents and the city over how long the people should stay. The W Hotel in Union Square, now owned by Marriott, is housing New York University students for the fall semester.
A handful of developers are making moves to repurpose hotels permanently, including the owners of the Bryant Park Hotel, who are in talks to convert the landmarked, century-old building back to its original purpose: office space.
“A lot of hotels in their past lives were offices, so they have the bones to be converted back,” said Deitelzweig. Although hotel floor plates tend to be too small for traditional offices, they’re ideal for boutique offices like his, he said, adding that a full conversion would take only 18 months.
Hungry investors are watching for properties that are in distress. “A lot of people are preparing themselves for the bargain basement,” said Sabena Arora-Akarte, founder of Acadia Lodging Brokers & Advisors. “They’re putting out word that they’re ready to jump.”
Deitelzweig said he is exclusively looking at properties that have been taken back by their lenders, so he can buy them from the banks at a good price. He might not have to wait long. Currently 10 hotels in the city are at least 90 days past due on their mortgage payment, according to data analytics firm Trepp. They collectively owe more than $800 million to their lenders.
One of those hotels— The Standard, High Line, in the Meatpacking District—owes $103 million. Even at the Financial District’s Holiday Inn, where rooms are half the price they are at The Standard, $87million in loans are in arrears.
Occupancy rates have crept back up to 38% since cratering in March, according to STR, but the market won’t make any kind of meaningful rebound that will put hoteliers at ease until at least 2025, according to Vijay Dandapani, chief executive of the Hotel Association of New York City.
It’s a dynamic situation, he said, but conversions are hardly a revolutionary concept in New York. The city’s structures are often built on the presumption that they’ll have many lives before they’re eventually torn down, if ever. In times like these, he said, all a property needs is some new packaging.
At least 73 of the city’s many thousand residential buildings were once factories, schools or hospitals, though hotels were most commonly reborn as apartments according to apartment search and analytics firm RentCafe.
The 116-year-old Prince George in Madison Square was a glamorous hotel until the 1980s, when it became a welfare hotel. After sitting barren for seven years, it was purchased by Breaking Ground, an affordable housing developer, which rehabbed it into a residence for the homeless.
“From the street level, it’s hard to absorb all the changes,” former Deputy Mayor Daniel Doctoro wrote in “Greater Than Ever: New York’s Big Comeback,” his account of rebuilding the city after 9/11.
Local Law 50
Hotel-to-apartment conversions were so hot in the city by 2015 that the controversial Local Law 50 was passed, barring Manhattan hotels with at least 150 rooms from converting more than 20% of them to other uses during a two-year period. The law expired last year.
At Breaking Ground calls came early on in the pandemic from hotel owners looking to reposition their properties, said Brenda Rosen, the group’s chief executive. She has fielded calls from RFR Realty about its Paramount Hotel and from the Chetrit Group for the Hotel Carter, both in the Times Square area.
The organization is converting 90 Sands St. in downtown Brooklyn, a former hotel it bought from RFR, into 500 units of affordable and supportive housing, Rosen said. And developer Fairstead is leading the $60 million renovation of the former Park 79 Hotel to 77 affordable units for senior citizens.
Still, repurposing hotels is not always easy.
“The devil is in the details,” JLL Senior Managing Director Jeffrey Davis said, referring to stringent zoning laws that outline what types of properties may exist in various pockets of the city and the unique requirements for each type.
“You put that all in the blender and think of what can be,” Davis said, “[and] you get a lot thinner about the actual properties that can make these changes.”
Apartment buildings require a 30-footlongyard, for example, while hotels need only 20 feet. To qualify for multifamily housing, apartments must be a certain size and include at least a kitchenette—which isn’t common in hotel rooms, noted James Power, a land use lawyer at Kramer Levin.
Zoning laws restrict certain building types to designated parts of the city. Apartments may not be built in most manufacturing zones, for example.
Building supportive housing is one of the easiest ways to convert hotels into useful properties, said Jessica Katz, executive director of the Citizens Housing and Planning Council. The smaller units are better for studio apartments that can be used by single, homeless adults, she said. But, she said, there are still too many rules.
“We need to take away some of the obstacles to rebalance the market,” Katz said. “If we get zoning regulations out of the way so the market can do its job, then we may find a much faster recovery.”
The flexibility to adapt existing, empty buildings would help the city leverage its strengths, said James Whelan, president of the Real Estate Board of New York. But not every property will get the green light for conversion.
And that presents a problem, Davis said. “What do you do with these hotels that can’t be used for anything else?” he said. “You have hotels that just don’t work as hotels anymore.”
Craig Deitelzweig President and CEO at Marx Realty & Improvement Co.November 2, 2020 9:00 AM
In 2021, will you buy or sell any real estate? What kind?
We will continue to be buyers of value-add office buildings in New York, Washington, D.C., and Atlanta. We hope to be able to purchase and reimagine/reposition more buildings to our distinctive, hospitality-inspired office offerings.
How f@*$ed is retail?
Poorly located retail is pretty f@*$ed. However, we own the Cross County Center — one million-plus square feet of vibrant, outdoor shopping and dining space in Yonkers, N.Y. — and it is doing amazingly well, because of its ideal location and terrific tenant mix. We like to think that forward-thinking ownership has something to do with it, too — we own the center with Benenson Capital Partners.
In this environment, outdoor centers will have an advantage, continue to outperform and attract the better retailers, whereas enclosed retail centers will only become more f@*$ed as they lose tenants to the better centers and bankruptcies.
How flexible are you with negotiating rents?
Not very.
Has your “dead to me” list grown?
I love everyone. I hope this isn’t the case but, if anything, I might be on someone else’s “dead to me” list.
Are you in the market for financing?
If I say yes, we will receive dozens and dozens of calls and emails from every capital markets banker in the city, so … no, we are not in the market for financing.
What would be the signs that things are NOT going to improve in 2021?
A once-in-a-lifetime pandemic, forest fires, floods, property damage, gun violence — hard to imagine things not markedly improving in 2021.
What do you think will NOT go back to normal?
I think everyone now appreciates family life and how family time should be cherished. That’s a good new normal!
Who do you like for mayor in 2021?
Carole Baskin.
What do you think the city and/or state should do to help both real estate and the city?
New York is the greatest city in the world with the most talented, industrious and resilient workforce; but the city and state should be more business-friendly and partner with companies to make New York an even better place to live and work. I find it frustrating when I hear certain politicians speak ill of our corporations or wealthy New Yorkers. That rhetoric is neither helpful, nor wise.
When I see all of the job growth that Amazon is bringing to the D.C. region as a result of HQ2, it reminds me that, certain New York politicians have to do a better job in making the city a more hospitable place for business — Queens should have had those good-paying jobs.
How do you think the November election will affect real estate? How do you see a Trump win? How do you see a Biden win?
Uncertainty around an election is never good, but with low interest rates and a Fed that is doing everything right, real estate will bounce back once there is a COVID-19 vaccine.
LIGHTNING ROUND
Where’s your apocalypse bunker? Does the screening room in my basement count?
Favorite at-home quarantine foods?
Tara Stacom sends me a bucket of KFC every once in a while.
Did you gain or lose weight during quarantine? KFC … this COVID 15 thing is real.
Sourdough bread, banana bread, other? Chocolate chip banana bread baked by my daughter Lily. She is the best baker, which was not a good thing during quarantine.
Which TV show have you binged?
I tried to watch “Schitt’s Creek,” but it didn’t do it for me. What am I missing?
What restaurant did you go to when restaurants reopened?
Katz’s Deli. Pastrami on rye.
Mayor de Blasio: Best Mayor or Best Mayor EVER? What’s behind door number three?
Best work-from-home hack? While on, yet, another Zoom call, I took a screenshot of myself, made it my background, and then slipped out of the frame. Still makes me laugh just thinking about it.
Where did you quarantine? Bedford, N.Y., with my wife, son and daughter. Although my son was not happy to leave college and my daughter was missing her high school friends, we found it great to have our kids stuck with us for a few months. Lots of time to play Monopoly together.
Biden, Trump or Kanye? They are all such great candidates, it’s just so hard to choose!
October 13, 2020
Target and H&M have signed new retail leases at the rebranded Cross County Center, formerly Cross County Shopping Center, in Yonkers, NY. Target will backfill 130,000 square feet at what was once home to the most successful Sears store in the nation. H&M signed a 10-year renewal to occupy 28,000 square feet for the first location of its upscale SOHO concept outside Manhattan.
The signings occur shortly after Marx Realty took over leasing and management of the historic shopping center earlier in the year. The firm has owned the center in partnership with Benenson Capital Partners for 65 years.
“As the retail sector emerges from the COVID-19 crisis, we have seen extraordinary foot traffic at the center showing pent-up demand,” said Craig Deitelzweig, CEO of Marx Realty.
Marx Realty was represented in-house by Mark Utreras. Target was represented by Ripco’s Jeffrey Howard, and H&M didn’t use a broker.
Target to Open 130,000 SF Store at Former Sears Location in Yonkers, New York
YONKERS, N.Y. — Target plans to open a 130,000-square-foot store at Cross County Center, a 1.1 million-square-foot retail power center in Yonkers, located north of New York City. Target has signed a 40-year lease to backfill a space formerly occupied by Sears.
A partnership between Marx Realty and Benenson Capital Partners owns Cross County Center, which features more than 80 retail and restaurant users. An opening date has not yet been determined.
Target to Open 130,000 SF Store at Former Sears Location in Yonkers, New York
YONKERS, N.Y. — Target will open a 130,000-square-foot store at Cross County Center, a 1.1 million-square-foot retail power center in Yonkers, located north of New York City. Target has signed a 40-year lease to backfill a space formerly occupied by Sears. A partnership between Marx Realty and Benenson Capital Partners owns Cross County Center, which features more than 80 retail and restaurant users. An opening date has not yet been established.