Last year, South Florida and the Orlando area boasted the fattest rent growth in the nation, surging nearly 30 percent and a little over 20 percent respectively, according to data from Realtor.com. Coming on top of huge rent jumps in 2021, the ballooning housing costs have pushed out many low-earning residents in the hospitality industry, which Florida’s economy heavily relies on. 

“We have great respect for the dignity of work. We know that a lower commute means a higher quality of life,” said the bill’s sponsor, Sen. Alexis Calatayud, a Republican representing southern Miami. 

Dubbed the Live Local Act, the proposal would exempt developments constructed in the last five years from property taxes for each unit targeted at low- and middle-income families, if the property has at least 70 units that offer rents at least 10 percent below market rate. Another provision would allow municipalities and counties to spare property taxes for owners who allocate units for those earning 50 percent or less of the area median income. 

The 93-page proposal also includes measures to increase the construction of affordable housing developments by easing the regulatory burden. For example, the bill would prevent local governments from requiring zoning changes for multifamily projects in commercial areas if at least 40 percent of units are set aside for households earning up to 120 percent of area’s median income. It would also require municipalities to provide listings of public land that may be available for affordable housing development.

The legislation “is the gas that’s thrown on the fire to begin resolving the housing crisis” thanks to its construction incentives, said Ken H. Johnson, a real estate economist working at Florida Atlantic University (FAU). But “it won’t be the total solution in and of itself.” 

Solving a housing crisis during the peak of a market cycle is challenging because land, labor and materials tend to be at their most expensive, the professor explained. In the future, to prevent wild swings in rental prices, Johnson urged lawmakers to boost the development of affordable housing during a market downturn when the cost of building is cheaper, or at least ease the path to construction to quickly add more supply when rent prices tick up. These measures could include pre-permitting land.

The Live Local Act also caps local government’s ability to institute rent controls, a growing trend in the past year. Some Democrats have criticized the legislation for serving as a handout to developers and landlords, while not providing protections to renters. The bill “is very much trickle-down economics, which doesn’t always work,” state Rep. Anna Eskamani, a Democrat representing parts of Orlando, told WPTV. “This is a corporate giveaway solution.”

Another section of the bill calls for redirecting funding to affordable housing programs. Annually, the legislation would provide $252 million to the State Housing Initiatives Partnership program, $259 million to State Apartment Incentive Loan, and $100 million to the Hometown Heroes Housing Program.

But the move follows nearly two decades of lawmakers raiding similar initiatives. A 2021 report by the Florida Housing Coalition, a Tallahassee-based nonprofit, accused lawmakers of diverting about $2.2 billion from the Sadowski Trust Fund, meant for the development of affordable housing real estate, costing the state 166,000 in affordable units. 

The bill will likely be amended as it moves through Florida’s House and Senate, but is likely to pass, given Republicans’ supermajority in Tallahassee. House Speaker Paul Renner and Gov. Ron DeSantis, both Republicans, have already voiced tentative support.

The proposal comes only a month after Tallahassee tackled another pressing housing issue: Florida’s cratering home insurance. In December, Gov. DeSantis signed into law legislation that essentially bailed out the industry after Hurricane Ian hit last fall. The storm’s recovery effort could become the state’s most expensive. 

Julia Echikson can be reached at jechikson@commercialobserver.com. 

The investment firm also extended its lease for 11 more years after originally signing a deal for 52,000 square feet in 2018. That deal put the firm across the street from what would become its main offices at One Vanderbilt, where it agreed to take 171,000 square feet.

The expansion allows TD Securities to move into the entire 23rd floor of 125 Park, according to SL Green. Overall, this means that TD Bank leases a total of 247,000 square feet across SL Green’s portfolio.

Brian Waterman, David Falk, Peter Shimkin and Daniel Levine of Newmark represented SL Green in the deal, while TD Securities used in-house representation. Newmark did not respond to a request for comment.

Also at 125 Park Avenue is Canon Business Solutions, which renewed its deal for 33,766 square feet in 2018 for a term of 10 and a half years in 2018. Other tenants include Meister Seelig & Fein, Pandora Media and Blink Fitness. 

The 26-story, 655,000-square-foot building between East 41st and East 42nd streets was declared a designated historic site in 2016 by the New York City Landmarks Preservation Commission and will soon turn a century old, having been built in 1923.

Mark Hallum can be reached at mhallum@commercialobserver.com.

What’s more, 13 million square feet of industrial space is currently under construction, as demand continues to increase. The largest new construction is MCB Real Estate’s 2.2 million-square-foot building in Hagerstown, expected to be delivered in the first quarter of 2023.

The fourth quarter saw a net absorption of more than 1.2 million square feet, contributing to an overall vacancy rate of 4.5 percent, with just over 12 million square feet currently vacant. Compared to the same time last year, both numbers have backtracked, as net absorption was approximately 3.7 million square feet with a vacancy rate of 3.4 percent.

The fourth quarter vacancy rate was also a tad over the third quarter’s 4.41 percent, while net absorption was more than 1 million square feet more at 2.3 million, suggesting a slowdown in the final quarter under economic pressures. 

On the bright side, while industrial lease volume is down from a year ago, the total amount of space under construction is consistent with 2021, which represents confidence in the market, Tom Whelan, principal for Lee & Associates-Maryland, noted in a prepared statement. 

Equally as important, rental rates for Class A product remain at all-time highs in the area, averaging $7.87 a square foot, and rents overall were up.

Notable leases signed during the fourth quarter included Baltimore International Warehousing & Transportation’s 244,304-square-foot lease at 5250-5330 Holabird Avenue; Amazon’s 241,962-square-foot lease at 1713 E. Patapsco Avenue; and Transdev’s 168,655-square-foot lease at 1610 Wicomico Street.

On the sales side, in the Baltimore market, Prologis acquired nearly 2.5 million square feet of industrial space from Duke Realty in various locations for approximately $230 million; Capital Electric purchased nearly 365,000 square feet of space from Trammell Crow Company for $76 million; and NorthBridge Realty Holdings acquired approximately 160,000 square feet of space from The Colad Group for $21.2 million. 

“The warehouse/industrial sector, both nationally and regionally, is still being impacted by changing consumer buying habits precipitated by the health care crisis, and the resultant need for additional space near major population centers to deliver products,” Whelan said.

Keith Loria can be reached at Kloria@commercialobserver.com.

“It is a very opportunistic time as we’re seeing a lot of [lenders] who came to the industry recently close up and go home,” Kaufman told CO of how Bayport can stand out in the current market conditions as other lenders scale back. “Being a balance sheet lender and not having to have our business predicated on the ability to sell loans to Wall Street really gives us a big edge, and also gives our borrowers a large level of confidence.” 

In Kaufman’s new role, she will be tasked with driving an expanded presence along East Coast gateway markets including Boston, New York City, Philadelphia, Washington, D.C., the Carolinas and South Florida. Kaufman, who has been in the real estate lending industry for more than 30 years, previously held senior leadership positions at American Home Mortgage Ventures, Preferred Empire Mortgage and Arbor National Mortgage.

Kaufman said as a number of lenders step back as interest rates rise, it provides a unique opportunity for Bayport to fill the void for borrowers in need of short-term capital. For multifamily deals, the lender provides interest-only loans at rates typically in the 10 percent to 12 percent range, according to Kaufman. She said the beginning of the year saw a big slowdown in borrowers seeking loans for multifamily, single-family rentals and build-to-rent properties, but the last 10 days have seen a big uptick. 

“Real estate investors who see opportunity with properties that need tender loving care and care to bring them back to market know that we’re still here to lend them money,” Kaufman said. “We’re here to stay and we’re here to support them as their opportunities come to them in this market.”

Bar-Mashiah takes on the chairman role after leading Bayport as CEO for the past decade. Prior to co-founding Bayport, he served as owner and president of Mortgage Enterprise, a New York State-licensed mortgage banker that originated more than $2.5 billion in residential mortgages. He also has served on advisory boards at Citicorp, Chemical Bank and GreenPoint Mortgage.

Over the next two years, Kaufman plans to stick with multifamily deals and transactions with a residential component to them rather than expanding into other sectors. 

“We want to stick to what we know best,” she said. “I think lenders who try to be all things to all people ultimately have a problem, and we want to stick to our expertise.” 

Andrew Coen can be reached at acoen@commercialobserver.com. 

He’s already designed a number of conversions, such as CBG Building Company’s The Oxford, a 187-unit apartment building in Oxon Hill, Md., which was adapted from a former 10-story office building; and Osprey Property Company’s 22 Light Street, an adaptive reuse of an existing six-story office building in Baltimore, which was converted into 40 units.

Currently, Soto Architecture is working with several developers in the D.C. region on possible office-to-multifamily conversions in the near future.

With D.C. recording more than 20 million square feet of vacant office space in 2022, there’s going to be a lot more of it. Bonilla-Verdesoto discussed the growing niche with Commercial Observer. His responses have been edited for length and clarity.

Commercial Observer: How would you characterize the trend of office-to-multifamily in the D.C. region?

Bonilla-Verdesoto: Creative adaptive reuse is a good characterization of what’s happening. This is not a new concept, but as office vacancy rates continue to climb in urban areas across the country, D.C., like many other cities, is looking for creative ways to activate downtowns. One way to make use of aging office buildings is to transition them into apartments.

What makes D.C. a leading city for these sorts of conversions?

The D.C. area office market lags its peer markets in recovery from the pandemic, as many employers have embraced remote and hybrid work. Although the latest market reports indicate positive Class A office absorption, there are still thousands of vacant square feet of Class B office space in the D.C. area, especially in older Central Business Districts in close proximity to mass transit stations.

Is it more challenging to do this in D.C. than in other places? What’s required?

The D.C. region presents several challenges for office-to-residential conversions. For example, each jurisdiction (Washington, D.C., Northern Virginia, or suburban Maryland) has its own zoning regulations and building code interpretations. Energy and sustainability requirements are also much more stringent than other cities. A typical office-to-residential conversion in D.C. will trigger stormwater management regulations, which usually includes vegetated roofs and other strategies that were not included in the original office building. D.C. also requires natural ventilation to the bedrooms to be provided via operable windows, while Maryland and Virginia accept natural air delivered via mechanical ventilation. 

What should developers be considering when thinking about doing this?

There are so many factors that owners and developers should consider, but I can narrow it down to five key things.

Investigate existing conditions: The first step is to gather as much information about the building as possible. Original floor plans are ideal, but anything that provides data about the building’s structure and its renovations will be helpful. Developers should invest in lidar scanning, ground-penetrating radar, and testing of existing structural systems, among others, while the design team reviews maintenance and inspection records.
Maximize rentable square footage: This might seem obvious, but given the very different floorplates between office and residential buildings, you have to get very creative when formulating the layout of a living space.
Integrate new MEP systems efficiently: Integrating the mechanical, electrical and plumbing (MEP) engineering systems in a strategic and efficient way in a potentially centuries-old office building is arguably the most challenging aspect of any conversion project. Older office buildings were built using different building codes. The adaptive reuse will trigger significant upgrades such as stair pressurization and new fire alarm system, among others.
Come up with creative solutions to enhance curb appeal: There is a clear and distinct difference between the entryway of a welcoming apartment building and a formal lobby of a corporate office building. In order to transform an office entryway to be ready to welcome residents into their new home, one must adapt and include textures, finishes and landscaping to achieve a residential feel.
Creative thoughtful amenities and common areas: Older office buildings lack the amenities found in brand-new apartment buildings like state-of-the-art fitness centers, dog spas, mail and package centers, workspaces, common areas and game rooms. Apartment-style living has come a long way.

What makes a property worthy of conversion?

We’ve found that the best candidates for conversion are existing office buildings where the allowable floor-area ratio has already been maximized and where other zoning restrictions are allowed to remain grandfathered (i.e. lot occupancy greater than allowed by current zoning code). Other characteristics include generous floor-to-ceiling height (minimum 10 feet to allow for mechanical ducts, sprinkler lines, etc.), structural systems that are easy to core-drill (i.e. steel construction, as opposed to post-tensioned concrete slabs), and footprints that allow for square footage maximization without the need for complex structural modifications.

What are the big challenges?

The biggest challenge is making the existing floor plate as efficient as possible in a way that natural light is provided to as many bedrooms as possible. This can be alleviated by specifying clerestories and glass doors. Other challenges include the treatment of the facades. Many Class B office buildings were built with large precast panels and ribbon windows, which don’t have a residential feel, and removing the precast panels and ribbon windows can be very expensive. There are creative ways where the panels and windows can remain in place and give the building a contemporary look. 

Do you expect this trend to continue?  

Yes. CBRE and other office market analysts have predicted additional conversions in the D.C. region and other large urban areas. The multifamily rental market remains strong, especially in central urban areas, while demand for office space continues to drop.

Keith Loria can be reached at Kloria@commercialobserver.com.

Tishman Speyer declined to provide the length of the lease. Asking rents at The Spiral range from $125 to $225 per square foot. 

Chicago-based Baker Tilly will relocate this summer and was drawn to The Spiral because of its roster of amenities, including coworking spaces and a top-floor lounge and terrace, said the spokesperson. 

CBRE’s Geoffrey Euston, David Glassman and Joe Cabrera handled the lease for Baker Tilly. A spokesperson for CBRE declined to comment.

SEB also inked a deal for slightly smaller digs at The Spiral.

The Swedish bank signed an 11-year lease for 15,000 square feet across part of the 28th floor, reducing its space from 20,700 square feet at 245 Park Avenue, according to Tishman Speyer. 

This summer, the bank will ditch the Park Avenue property, where it’s been for more than four decades, because The Spiral’s amenities and green design were too good to pass up, said Cushman & Wakefield’s Aron Schreier, who represented SEB in its deal with colleague Jonathan Schindler.

“As one of the newest office buildings in the city, The Spiral’s best-in-class amenities and efficient technologies coupled with its eco-friendly and sustainable design made it a perfect fit for [SEB],” Schreier said in a statement.

SEB and Baker Tilly are the latest big names to take space at The Spiral, following contracts from Pfizer, asset management firm AllianceBernstein and British financial company HSBC, which decided to move its U.S. headquarters to 265,000 square feet at the building in May. The two new leases bring the 2.8 million-square-foot tower to 72 percent leased.  

“We are pleased to welcome Baker Tilly and SEB,” Amir Sperling, a managing director at Tishman Speyer, said in a statement. “With its iconic architecture, collaborative spaces and abundant access to fresh air and natural light, The Spiral embodies the future of the workplace.”

Tishman Speyer’s Gus Field, Gregory Conen and Samuel Brodsky handled both deals in-house for the landlord. 

Celia Young can be reached at cyoung@commercialobserver.com.

SL Green declined to provide the asking rent, but asking rents have ranged between $115 to $145 per square foot in the tower, as Commercial Observer previously reported.

777 Partners, which has its main headquarters at 600 Brickell Avenue in Miami, was represented by Peter Sabesan and Gregg Cohen of Cresa, while Paul Glickman, Alexander Chudnoff, Diana Biasotti and Benjamin Bass of JLL handled the deal for SL Green. JLL declined to comment.

One Madison has attracted other investment firms, most notably Franklin Templeton Investments committing to a 15-year lease in September 2022 for 347,474 square feet spanning floors 11 through 22 in the 1.4 million-square-foot office tower.

Franklin Templeton’s deal ranked among the 10 biggest of the year.

Restaurateur Daniel Boulud also plans to open a 16,000-square-foot steakhouse on the ground floor while acting as the caterer for the 7,000-square-foot tenant lounge and 11,000-square-foot rooftop event space, CO reported in December.

SL Green bought One Madison from MetLife for $918 million in 2005 and got to work on a $2.3 billion plan to gut-renovate the historic property — preserving the limestone facade — and add a new, 500,00-square-foot glass tower on top.

It sold a 49.5 percent stake to the National Pension Service of Korea and Hines in 2020, then an anonymous investor picked up another 25 percent of SL Green’s stake in the asset in December 2021.

SL Green plans to finish work on the tower later this year.

Mark Hallum can be reached at mhallum@commercialobserver.com.

Ireland House, which is what the government office calls itself, signed a long-term lease. Savills declined to provide the exact term or the asking rent. 

David Goldstein, Jim Wenk, Sam Mann and Allison Buck of Savills handled it for Ireland House, while Megan Sheehan, Gus Field and Sam Brodsky represented Tishman Speyer in-house. The landlord declined to comment.

Tishman Speyer owns the MetLife Building in a partnership with the Irvine Company. Other recent deals in the property include The Hospitality Department signing a 10,000-square-foot lease for a seafood restaurant in September 2022, with an opening date sometime this year, CO previously reported. 

Also, in May 2022, the Capital Grille, Black Seed Bagels and Jack’s Stir Brew Coffee all took up residence in the 58-story building. The latter two have small footprints in the building, while Capital Grille leased 15,000 square feet for a steakhouse and an outdoor patio along East 45th Street.

Mark Hallum can be reached at mhallum@commercialobserver.com.

The company, now formally known as Paramount Global, sold its Manhattan headquarters at 51 West 52nd Street in late 2021 for $760 million.

Aside from CBS, hospital trade group the Greater New York Hospital Association inked a 10-year, 58,017-square-foot renewal for its offices in the 1973-built tower, according to SL Green.

The organization represents 280 hospitals and long-term care facilities in the tri-state area and works to lobby state and federal governments on behalf of its members. It has been in the building for more than a decade, last signing a lease expansion in 2013.

Asking rent in both deals was $62 a square foot, according to an SL Green spokesperson.

Scott Gottlieb, Andrew Sussman and Rocco Laginestra with CBRE represented CBS in the transaction. Josh Kuriloff and Drew Braver of Cushman & Wakefield handled the lease for the hospital association. A spokesperson for CBRE declined to comment. It wasn’t clear who handled the deal for SL Green.

Braver said in a statement that the renewal “was an opportunity for our client right size their long-term office footprint and secure a landlord investment to future proof their space.”

Carmaker BMW is the third anchor tenant in the building, where it has maintained 227,000 square feet of office and retail space for years. Designed by Eggers & Higgins, the property was formerly known as the Ford Motors Building, because Ford had occupied the showroom that BMW continues to operate.

“These transactions create significant leasing momentum as we start the new year and reaffirm the growing corporate sentiment that there is no substitute for the importance of in-office occupancy to support employee collaboration and company culture,” said Steve Durels, SL Green’s leasing director, in a statement.

Rebecca Baird-Remba can be reached at rbairdremba@commercialobserver.com.

The project will replace the College Station Garage, which sits on two acres at 190 NE 3rd Street, about a block west of Bayfront Park. 

The deal grants the joint venture a 99-year ground lease, and the MPA will own a 1,355-cart parking lot within the development. In addition to paying the property taxes, the developers will either pay $700 per residential unit annually or 10 percent of the rent net of expenses for four years after the development’s completion, depending on which formula grosses the most revenue, according to the South Florida Business Journal. 

Until the new parking garage is operational, the developers will also pay the MPA $124,544 monthly. During construction, which is expected to start in about two years, car owners will be able to use the Courthouse Center parking lot.

Representatives for both the MPA and the joint venture have yet to respond to requests for comment. 

Related and ROVR were awarded the project by the city, beating Terra and Apollo Global Management, who had proposed building two towers with both a residential and office component. 

Across the neighborhood at 225 North Miami Avenue, Related and ROVR, along with BH Group, have teamed up to develop a 37-story condo building with 343 units. The partnership secured a $76 million construction loan in July. 

Julia Echikson can be reached at jechikson@commercialobserver.com. 

In another deal, private equity firm Finanz Butik Management signed a 13-year, 5,975-square-foot sublease from Bradesco, formerly BAC Florida Bank, to occupy a portion of the 14th floor of The Plaza’s South Tower.

Newmark’s Clay Sidner and Jeremy Hakala represented the tenants.

“These transactions represent a notable milestone as the tenants expand their South Florida presence in Class A office spaces,” Sidner said in a statement.

According to Newmark Research, South Florida’s office market experienced 3.3 million square feet of leasing activity across 1,063 transactions in the third quarter of 2022.

The leases reflect continued demand for South Florida office space, even as many white-collar workers have shifted to remote work. The region is seeing an influx of new office tenants that’s offsetting the downsizing by existing office users, said Tere Blanca, chairwoman and CEO of Miami-based Blanca Commercial Real Estate.

“Whatever contraction we might see is mitigated by the new absorption being created by the new arrivals,” Blanca told Commercial Observer. “Whatever is available is getting leased, oftentimes by companies that are new to the area.”

Jeff Ostrowski can be reached at jostrowski@commercialobserver.com.