Is this the end of expensive office space in New York??

David Goldsmith

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Bobby Zar buys Midtown office building for 15% less than 2015 price​

ZG Capital pays $103M for 20-story property at 43 East 53rd Street​

New York
Jul. 28, 2022 07:05 PM
By Pat Ralph | Research By Jay Young

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43 East 53rd Street with ZG Capital Partners’ James Tamborlane and Bobby Zar (Google Maps, LinkedIn)

43 East 53rd Street with ZG Capital Partners’ James Tamborlane and Bobby Zar (Google Maps, LinkedIn)
Bobby Zar and James Tamborlane’s ZG Capital Partners has closed on another Midtown East office building — at a substantial discount to its previous sale price.
An entity connected to the real estate investment firm bought the 20-floor, 113,000-square-foot tower at 43 East 53rd Street in Midtown East for $102.5 million from an entity tied to Florida-based MEK Management Services Inc., according to city property records filed Thursday. The contract for the acquisition was reported in April.

Tamborlane signed for ZG Capital Partners. MEK Management’s Richard Ostrovsky signed for the seller.

Ackman-Ziff’s Ross Mezzo is arranging the sale. Newmark’s Jordan Roeschlaub and Dustin Stolly arranged a $120 million loan from ACRES Capital and $55 million of limited-partner equity from Rialto Capital for the acquisition and renovation.
Built in 1990, the office building was bought by MEK Management for $120.3 million in 2015, according to city property records. The new owners are planning to spend upwards of $80 million to upgrade the 20-story, 134,000-square-foot property, which was formerly known as the Santander building.

The Manhattan office market has been dragged down by vacancies and subleasing as employees cling to their work-from-home routines. Older, unrenovated buildings have been especially punished.

ZG Capital’s purchase of 43 East 53rd Street is the latest of a number of deals that the investment firm has completed for buildings across New York in recent years.

The investment firm also purchased the largely vacant office building at 836 Broadway in Union Square last October for $40 million. The six-story, 81,000 square-foot building previously housed New York University.
And ZG bought the 20,000-square-foot, mixed-use building at 654 Broadway in NoHo for $10 million last year and the waterfront Bruckner Building at 2417 Third Avenue in the South Bronx for $65 million in 2019.

David Goldsmith

All Powerful Moderator
Staff member

Nearly Half of Companies Will Cut Office Space Next Year: Survey Nearly half of companies plan to cut their office space in the next year, joining a growing number who have already done the same, according to a July survey from flexible workspace software provider Robin.

Robin’s survey of 250 U.S. companies found that 46 percent plan to reduce their office footprint over the next 12 months. Of those, 59 percent said they would shrink their space by more than half. To make matters worse, for the office market at least, a potential recession will likely encourage firms to start subletting their offices rather than fire workers, according to the survey.

“For most folks’ balance sheets, it’s people and real estate which are No. 1 and 2 on the budget,” said Zach Dunn, co-founder and vice president of customer experience at Robin. “You get a lot more out of people than real estate in the average company nowadays, and I think that people being prioritized during a recession is not inherently a bad thing.”
About 73 percent of firms that have most of their employees working in person said they would consider going hybrid before resorting to other cost-saving measures such as layoffs. Office brokers and lenders have seen remote work as a greater threat to the real estate market than a recession, but the survey’s findings show many companies will ax space first during an economic downturn.

While companies may start cutting back, hybrid work could also encourage firms to open satellite outposts for remote employees and prioritize efficient, smaller offices, Dunn said. Only 11 percent of the companies surveyed were using all of their space, and 45 percent were using only half or less than half of their current footprint.
“If you look at any one single office, it probably doesn’t need to be as sprawling as it was before to serve the same number of people,” Dunn said. “But as opposed to just shedding office space indiscriminately, people are being more deliberate about what they need that office to do for them in this new world.”
Plenty of firms have started cutting underutilized space or ditching plans to open new offices in recent months. Yelp announced in June that it would eliminate mandatory in-person work and closed 450,000 square feet of its offices in New York City, Washington, D.C., and Chicago. Amazon and Meta followed suit, announcing that each tech tycoon would slow its expansion in the Big Apple while reevaluating workplace strategy. Salesforce put more than 412,000 square feet of its San Francisco office on the sublease market in July while Twitter recently announced plans to close and downsize offices around the world, including trying to offload a full floor of its New York City outpost.
The news dashed the hope of commercial real estate brokers that the office market will return to normal, though they weren’t feeling very optimistic to begin with. The Real Estate Board of New York found that in July New York City brokers’ confidence about the market hit the lowest it’s been since 2020. Both commercial and residential brokers cited concerns over a recession, rising inflation and higher interest rates as the reasons for their worries.