Before The Ball Drops: 12 Stories That Defined NYC CRE In 2024
This year will not be remembered for a flurry of new developments or billion-dollar transactions. And yet, 2024 was a year that may define the future of New York City for decades to come.
Despite expectations of low interest rates, the Federal Reserve cut rates by just one percentage point — and it took a full year to do so. Plus, insurance and construction costs remain high, preventing developers from taking action.
But the groundwork was laid for big changes, both with the commercial and residential portions of City of Yes changing zoning code and easing restrictions across the five boroughs and the housing deal struck in Albany that brought back some tax breaks for developers of apartments.
It was also a big year for some of the most influential players in the game, though whether it was good or bad depends on the firm. That includes Mayor Eric Adams, who remains in hot water due to ongoing investigations and charges of corruption.
But experts predict that office vacancy will come down in 2025. And though banks may be in trouble due to a plethora of problem loans, more liquidity is likely to be available in the market. That all sets New York City’s real estate industry up for an exciting 2025.
But before the ball drops, Bisnow compiled a list of 12 stories that defined the year for commercial real estate:
Adams Administration's Cozy Relationship With Real Estate Draws Criminal Scrutiny
Adams, who once proclaimed, “I am real estate,” and his inner circle became the subject of multiple federal and state indictments this year. In one set of allegations, the Department of Justice alleged that Adams accepted campaign funds from “straw donors” linked to businessmen with real estate interests in NYC. While the city's industry leaders didn’t back away from their support for the mayor after the FBI’s indictment, they appeared to slow down on funding Adams’ 2025 reelection campaign in the aftermath. Investigations are reportedly ongoing, but a trial is expected to start in April.
The year ended with bribery charges filed against Adams’ former Chief Adviser Ingrid Lewis-Martin, claiming that she expedited Department of Building permits for two New York hoteliers in exchange for financial bribes in excess of $100K and benefits for her son.
But other investigations are still in the works. Manhattan District Attorney Alvin Bragg’s office seized the cell phones of the Lewis-Martin, a senior official at the NYC Department of Citywide Administrative Services, a Cushman & Wakefield broker who runs the firm's account with the city, and five more people as part of an investigation into whether Adams’ administration had favored deals with politically connected commercial landlords. The City Council's oversight committee spent hours grilling DCAS officials about their relationships with commercial landlords — and shortly after that hearing, the city paused a lease at one of the office buildings in the spotlight and dropped a previously unknown industrial deal that could have netted developers more than $600M.
NYC Says Yes To First Citywide Zoning Amendment Since The ‘60s
NYC lawmakers passed a landmark amendment this year, City of Yes for Housing Opportunity, aimed at loosening zoning restrictions around housing for the first time in decades amid record-low apartment vacancies and rents near all-time highs.
After a year and a half of deliberations, the City Planning Commission put the proposal in front of the public in what turned into a 15-hour hearing over the summer. Over the next five months, it progressed through a two-day City Council grilling and weeks of negotiations among city council members and the mayor's staff. A $5B funding commitment from Gov. Kathy Hochul and the city government got the deal over the hump, clearing a final New York City Council vote early this month.
The measure raised the floor-area ratio cap, removed some hurdles for office-to-residential conversions, changed where developers have to add parking to apartment buildings, legalized accessory dwelling units in some parts of the city and raised density maximums for housing close to transit hubs. The changes unlock the potential for developers to build 80,000 new residences over what was previously allowed.
Housing Development Less Of A Dirty Word
The housing crisis escalated this year as month after month rents set new records.
The challenge has caused once-NIMBY officials to have a reckoning. And, as a result, several controversial projects that developers have spent years fighting for finally are moving forward.
Ian Bruce Eichner struck a deal to build a 355-unit apartment building, with 106 units set reserved as affordable workforce housing, across from the Brooklyn Botanic Garden. The agreement came right after he threatened to walk away from the negotiating table.
Meanwhile, in Harlem, Bruce Teitelbaum has returned to the negotiating table for his One45 project. His plans for the complex consist of two mixed-use buildings and one retail building. That includes a community center and 968 new dwelling units, 291 of which would be permanently affordable, according to the latest zoning application. However, the latest plans cut the amount of affordable housing from what was proposed earlier this year.
Even the city moved forward on its plans to build affordable housing for seniors in Little Italy, filing an eviction notice against the Elizabeth Street Garden. Still, that eviction has been delayed until a February hearing.
A Sigh Of Relief As Office Market Recovery Begins
The office market went into high gear this year, with a flurry of large leases, including 1M SF deals signed by Blackstone and Bloomberg.
In the third quarter, Manhattan office availability hit a three-year low, with activity up nearly 50% year-over-year, according to Savills.
The trend was exemplified by SL Green, which, despite major losses in previous quarters, revised its earnings guidance at the beginning of the year upward by a dollar per share.
The REIT has leased 3.5M SF of office space in Manhattan, exceeding its target for the year by 1.5M SF, and still has a pipeline of over 900K SF of ongoing lease negotiations or proposals. Its occupancy is at 92.5%, above the 90% reported in the last quarter of 2023, SL Green Executive Vice President and Director of Leasing and Real Property Steven Durels told Bisnow.
“That vacancy will go down further next year, and we don't see any reason for things to change,” Durels said. “There's strong optimism from tenants that we speak to about where the economy is headed. They feel good about their businesses. They want to invest for the long term.”
Plus, the company is offloading unwanted assets to focus on Class-A office space and working out sweetheart deals with lenders to erase problem debt. Last month, SL Green sold an 11% interest in One Vanderbilt, valuing its Midtown Manhattan supertall at $4.7B, making it the most valuable office building in the country.
Overall, SL Green’s stock price is up over 60% year to date. Its efforts have forced short sellers to eye other prey. At the end of April 2023, more than 28% of the company’s publicly traded shares were held by short sellers. Today, that figure is just 11%, according to Marketbeat data.
Park Avenue Leads The Way
Park Avenue underpinned that office recovery as the finance sector flocked to the submarket.
Data by CBRE provided to Bisnow in July showed that office availability on Park Avenue was just above 8%, while average asking rent pushed past $100 per SF. Space has only gotten tighter since then.
In the rest of the city, the average availability rate was 22%, with that of high-quality spaces in superior locations standing at just 17%.
Durels said that the drive towards Park Avenue was already happening prepandemic, but continued afterwards due to an influx of new construction and redevelopment. That’s created a concentration of high-quality space in an area where financial tenants want, or need, to be.
But supply has since been depleted, causing tenants searching for large-scale leases to look elsewhere.
“If you want location, you want high profile and you want good product, that drove a lot of the leasing on Park Avenue,” Durels said. “Now, you're seeing some of that shift go over to Sixth Avenue, where there are a generation of buildings that have undergone large scale redevelopment up and down the avenue. Those are larger buildings with bigger floor plates.”
RFR Holdings Attempts To Escape Turmoil
Aby Rosen and Michael Fuchs' RFR Holding had some gains this year, but not without experiencing lots of pain.
The developer behind some of the most iconic buildings in the city began the year with news of a $2.5B debt bill piling up. Defaults eventually turned into threats of foreclosure.
At its crown jewel, the Chrysler Building, RFR is battling with Cooper Union, which owns the land beneath the building, following its failure to pay ground rent. In the meantime, Cooper Union has taken control of the tower, and is collecting payments from the tenants inside.
This summer, in the span of a month, RFR was slapped with foreclosure notices at two separate properties. And, earlier this month, at a 42-story office tower in Battery Park City, a special servicer filed preforeclosure documents in court after the landlord failed to pay off its $180M mortgage.
But the developer seems to be cleaning up other parts of its portfolio, which may assist in maintaining its holdings in the long run.
In June, RFR sold 980 Madison Ave. to Michael Bloomberg for $560M. In October, facing foreclosure on an 827-unit development site in Gowanus, the developer chose to sell for $160M, making a quick profit while offloading the debt tied to the plot.
Plus, at the Seagram Building, RFR was helped by Blue Owl Capital increasing its space by 42%. The lease brought the building to nearly completely occupied, and asking rents have reached $275 per SF.
Hochul Gets Albany To Agree On Housing Deal
After failing to get any traction on housing in 2023, Hochul tried again in 2024 — only this time, she succeeded. Lawmakers blew past the state’s budget deadline amid negotiations but reached a deal in late April for a housing bill. Developers who already had 421-a projects underway but weren’t likely to meet the completion deadline for 2026 were given a reprieve in the form of an extension until 2031.
Meanwhile, legislators agreed on a 421-a replacement, 485-x, which set new area median income requirements for affordable units and guaranteed a wage increase for construction workers depending on how many units in total the development is set to deliver — much to the chagrin of developers, who say the abatement doesn't make financial sense for large projects.
Distress Finally Hits Home
Lenders still keep kicking the can down the road, which means that the distress that experts have been anticipating has yet to materialize and opportunistic investors have yet to pounce.
But that stress inched closer this year as the number of borrowers defaulting for a second time nearly doubled.
Fear set in when UBS’ real estate investment arm auctioned off a 920K SF Midtown Manhattan office for just $8.5M, swallowing a 97.5% loss. Other investors similarly opted to simply write buildings off rather than keep them on their books. That includes 9 Times Square, which sold for a $100M loss.
Multifamily owners are also facing the music, as laws surrounding rent stabilization and other affordability measures caused costs to outpace rent roll.
On the national level, roughly 7.4% of multifamily CMBS loans were delinquent or in special servicing by the end of June, up from about 3% at the start of the year. As of October, the multifamily sector had a 11.2% distress rate, according to a report by Cred IQ.
New York Community Bancorp In Crisis
New York Community Bancorp started the year with chaos.
Shares in NYCB on March 6 plummeted more than 40% before trading was halted following reports that the regional bank was in trouble largely due to its commercial real estate loans. As everyone assumed that surely the bank would collapse, a $1B cash infusion was announced.
That money came with a takeover from a group of investment funds led by former Treasury Secretary Steven Mnuchin.
NYCB is undergoing a thorough evaluation of its loan book. That has led the bank to realize the sheer number of its problem loans and has forced it to push back profitability expectations.
The bank has also instilled new leadership and converted its holding company name to Flagstar Financial.
Queens Is Getting A Soccer Stadium, Finally
Two years after the city, New York City Football Club and developers Sterling Equities and Related Cos. struck a deal to build a 25,000-seat soccer stadium in the Queens neighborhood of Willets Point, developers finally broke ground this December. The stadium project is being built on city-owned land, so to get it across the finish line, it’s also expected to deliver 2,500 units of 100% affordable housing, 40K SF of public space, a 250-key hotel and a 650-seat public school. Later phases of the project include office and retail space.
Skepticism about its projected $6B economic impact remains: the NYC Economic Development Corp. allegedly refused to share its calculations with the city’s Independent Budget Office, which functions as a fiscal watchdog. That led to a damning assessment from the NYC IBO just days before the groundbreaking, revealing that the developers could be forgoing between $74M and $500M in tax revenues.
New Laws For Last-Mile Industrial, Hotels And Resi Brokers That The Industry Hates
In the heat of the summer, NYC’s hotel industry got an unpleasant shock in the form of a bill pointing the finger at hotels’ role in human trafficking. The Safe Hotels Act, which sent the hotel industry into a frenzy, wanted to add a licensing requirement, require panic buttons and eliminate hotels’ abilities to use third party contractors for everything from laundry to security. Established trade groups committed to spending millions fighting the bill and multiple trade groups formed to voice their opposition. But after negotiations and revisions, the Hotel Association of New York City got on board with the Hotel and Gaming Trades Council union-backed bill, which passed in late October.
It wasn't just hotels that got new licensing requirements this year. In the spring, the City Council passed legislation requiring proposed new last-mile facilities in the five boroughs to apply for special permits. As a result, developers said they expected to see a near total end to new last-mile facilities in the city.
Plus, one other group in real estate looks set to face a big change to the way they do business in 2025: pretty soon, whoever hires a broker in an NYC rental apartment transaction will also be the party that pays the broker fee. Even though that’s how it works in almost every other part of the country, in NYC’s recent history, it’s been the case that the renter pays the fee even if a landlord hired a broker. The law — decried by the Real Estate Board of New York but celebrated even by some of the brokers Bisnow spoke to — is set to take effect just as brokers’ busiest period kicks off, in early summer next year.
City Cracks Down On Unlicensed Cannabis Sellers
When New York State legislators passed their budget this year, they allocated some cash for NYC to start closing down illicit cannabis stores, thousands of which have been — and continue to be — operating without a license throughout the five boroughs.
In three months, a multiagency task force headed up by the NYC Sheriff closed down around 750 unlicensed stores under Operation Padlock to Protect. Retailers were the primary target and landlords ended up in the crosshairs too, unable to access their properties once the Sheriff had placed padlocks on the storefronts, but lenders have so far escaped responsibility.
And as it turned out, many of those shuttered properties still have active mortgages, which can't legally be partially paid by sales of a federally scheduled substance (as marijuana still is). Some of those lenders, such as JPMorgan Chase, have known about these properties for over a year.
