Interviews Michael Cohen, Tri-State Region, Colliers International, Meridian Investment Sales, Principal, Williams Equities

0:00 Speaker 1 Good morning. This is Mike Stoler for the Solar Real Estate Report. Is our happy days here again? That’s what it sounds like. I mean, leasing has increased. It’s the best time in over five years. It’s really a good time in the office leasing market for certain properties and different types. So today I have an individual who sides

0:21 both sides of the coin as an investor in real estate. I have Michael Cohne, who is a principal at William’s Equity and on the other side, in the leasing side, in the state of the market side. He is the Tri State president for Colliers. Thanks for being.

0:38 Speaker 2 Here, Thank you for having me, Michael, So I.

0:40 Speaker 1 Said, happy time is in here again. What’s happening?

0:43 Speaker 2 Well, we just released our first quarter statistics this week and in the first quarter of twenty twenty five, leasing volume was over eleven million square feet, almost eleven and a half. And while one can’t extrapolate from a single quarter, at the pace we are going, if we kept it up through the year, we’d have forty six million square

1:06 feet of leasing volume in twenty twenty five. Now, I don’t want to jinx it, and that’s not a prognostication, but the pace is ahead of the pre pandemic years such as twenty nineteen. So there is absolutely no question the demand side of the equation has been restored.

1:25 Speaker 1 Okay, And what type of buildings?

1:27 Speaker 2 So yes, of course we’re seeing heavy concentration in the newer buildings, the buildings with amenities, the so called Class A buildings, but it has begun to trickle down into what I like to call the a’s of the BS.

1:43 And we see activity all across the spectrum, all geographies, even Third Avenue.

1:52 Speaker 1 Even Third Avenue, I mean, you had a dynamic building on Third Avenue, you were able to sell it. Let’s talk about that building.

1:59 Speaker 2 I think, I think the building your thing is Madison Avenue six fifty five Madison, and that was a terrific win win. I’m going to put my Williams Equities hat on, take off the colliers at And yet we meticulously emptied out that building over the ten years prior to the pandemic, having no expectation there was going to be a pandemic,

2:19 but realizing that in that neighborhood it was worth more dead than alive, and we sold it to extell who assembled the site, that’s what they do. They assemble they redevelop and they’re going to knock it out of the park with a new residential building on sixtieth and Madison, which is what belongs there, and we instead acquired what

2:42 we do, which is an A of the b’s at four seventy Park Avenue South, and we have tremendously seeing activity at that new asset.

2:50 Speaker 1 What type of people are moving into four seventy Park Avenue South, So.

2:54 Speaker 2 It’s a real mixed bag. It’s your typical upscale midtown South Tennansey, you know, young, but a variety of industries, tech, media, even law. So we’ve just been we feel like we hit the perfect inflection point in the market and we’re very, very pleased with the outcome and we’re very happy for Gary Barnett at Extel.

3:19 Speaker 1 So what are you doing with regard to your other assets that William Zequity owns.

3:25 Speaker 2 So we’re taking a hard look asset by asset, Is this asset a thriving commercial property? And in most cases the answer is yes, because of course our strategy is the a’s of the bs. But in some cases we’re taking a look and we’re saying, maybe this is another six point fifty five better off empty more valuable and

3:47 we can redeploy that capital, or in some cases we’re looking at conversions where we might stay in the deal and diversify our portfolio using some of the active city programs that are available.

4:04 Speaker 1 Which programs specifically, well.

4:06 Speaker 2 The one that everybody likes is the four eighty five X the twenty five or thirty year abatement, And there are also historic tax credits available for certain properties. And when you add it all up, it begins to make sense.

4:22 Speaker 1 What do you think of all of these portions of the buildings, these office buildings that they’re selling the retail condominiums?

4:30 Speaker 2 Well, selling the retail condominium to me, now this is a personal perspective, is like eating your children. A well located building with thriving retail gives you a diversified product. It can buoy the office. If there are hard times for office and good times for retail, and we’ve seen that movie before. If you have no choice and you

4:55 need to sell the retail in order to extract capital and and to make your capital stack work, then that’s what you do. And certain landlords business plans are based on that sort of thing. They’re not long term holders.

5:09 But for us as long term holders, we’d be very reluctant to part with good retail at the base of a thriving office building. What about coworking, So coworking’s back, it’s a little different from before. It’s more of a partnership between the landlord and tenant. The risk is being distributed and there’s no more of this enterprise full floor

5:34 or multiple floor short term you know, two year tenancy. That’s not what’s in vogue. We’ve gone back to basics. It’s office suites, and it’s folks like IWG and Industrious and some of their competitors that feel like they want to be a first class provider, catered to the onesies and twosies with a much lower risk profile than when

5:57 you have team rooms or full floor and there is demand for that, and it’s thriving, and we’re seeing them show up in the statistics again as part of the absorption, part of that eleven million square feet.

6:08 Speaker 1 What about downtown?

6:11 Speaker 2 Can I take the fifth You can?

6:13 Speaker 1 No, you can’t take them over here? Okay.

6:16 Speaker 2 You know, Downtown is littered with the pioneers, each generation of which felt that its time had finally come for residential downtown. It seems to be a thriving market. I don’t do residential, but as an informed observer, we see a lot of success. Office still very big vacancy, still a lot of competition. Certainly the Class A buildings are

6:42 faring better than everything else. But I think I would be very hesitant to invest in our product type, you know, B product downtown. I think that’s there’s a long way to go.

6:56 Speaker 1 How are you attracting new tenants.

6:58 Speaker 2 So the you know, it’s back to the same old, same old. Obviously the basic upgrades of the building and being in the right location, but on top of that, we’re still punching out amenities. Roof decks, conferencing food and so forth are very popular. And also we got to build a space. We’re no longer able to say to

7:24 a midtown South tenant, you know, here’s fifty or seventy five dollars, you go build your space, thanks very much. We got to build it. Often we have to furnish it. These tenants they want to walk right in the door and plug in, and we’re happy to do it. And that’s really the way to leave space, even in the

7:42 so called a’s of the BS.

7:43 Speaker 1 And with regard to the A and B. The rents are on one hundred and sixty to two hundred dollars. I’ve heard about the statistics right now. So on Park Avenue in certain of the markets.

7:54 Speaker 2 Sure, so Park Avenue the availability rate is single digits, and you know, many many spaces there are renting in triple digits and higher, especially the trophy buildings like the Seagram’s Building and four twenty five. But there’s a real scarcity of space on Park Avenue. Following close behind is Sixth Avenue. Those are probably the two most thriving popular

8:23 midtown thoroughfares, and oddly enough, sixth Avenue looks like a bargain when you compare it to Manhattan West and Hudson Yards, where you’re well into the triple digits. So there’s a lot of demand for the new and the like new both.

8:43 Speaker 1 Last question, what opportunities do you see out there for an investor?

8:47 Speaker 2 Well, that’s very interesting. We’re the the interest rate environment. The seven percent rate is still a challenge for a lot of folks who invest in real estate. In the ten or so years leading up to the pandemic, and we’re still seeing deeds in lou foreclosures and sale. There are going to be some bargains out there. The buying

9:14 pool no longer includes the hedge funds and the institutional buyers. These are the market has been relegated to cash buyers, family offices, people who are in it for the long term. ROI has replaced IRR as the benchmark, and I hate to use the word bargain, but there will be some good opportunities.

9:35 Speaker 1 I’d like to thank Michael Cohene for being here today.

9:39 Speaker 2 Thank you, Michael Stoller