October 2024

North America

·Tishman Speyer refinances Rockefeller Center with $3.5b CMBS loan, largest CMBS loan for a single office property on record. Tishman Speyer has finalized a $3.5 billion refinancing loan for Manhattan’s Rockefeller Center, 7.3 million sq ft, co-owned with Henry Crown & Co. Led by Bank of America and Wells Fargo, the loan has a fixed 6.2% interest rate. Top tranche bondholders will receive rates of around 5.4%, 15bps tighter than the original guideline yield. Proceeds will pay off the previous $3b in existing debt, which includes a 20-year CMBS loan and additional mezzanine financing maturing in early 2025. The refinancing will also fund around $247m of leasing reserves and return $180m of equity to the owners. The refinancing also supports leasing reserves as the center nears the completion of a major overhaul. The 13-building campus, now 93% leased, continues to attract major tenants like Deloitte, Lazard, and Christie’s. (Source: Commercial Observer, Tishman Speyer, CRE Analyst, CoStar, Yahoo Finance, 2024)

Rockefeller Center Refinancing Schedule

·Open AI expands to New York with first East Coast office lease. OpenAI, the maker of ChatGPT, has signed a lease for 90,000 square feet in the Puck Building in SoHo, marking its first New York office. This expansion follows the company’s recent San Francisco real estate growth, where it secured 1 million square feet of office space. This includes OpenAI’s lease of c. 315,000 sq ft this year, San Francisco’s largest office deal this year. This is on top of the San Francisco sublease from Uber in the Mission Bay neighbourhood that OpenAI took, which was the largest office lease for 2023. The move comes after OpenAI’s $6.6 billion venture capital funding, positioning the company to further expand its workforce. OpenAI’s entry into New York reflects the broader AI sector’s revival in commercial real estate as companies seek office space in major cities. (Source: Commercial Observer, Tishman Speyer, CRE Analyst, CoStar, Yahoo Finance, 2024)

OpenAI signed a lease in the Puck Building in SoHo, New York

·US hotels see minimal revenue growth and slight occupancy decline in Q3. In the third quarter of 2024, U.S. hotels experienced flat room demand year-over-year, with an average daily rate (ADR) increase of only 1.4%, lagging behind inflation. Revenue per available room (RevPAR) grew by a modest 0.9%, marking the second-lowest growth since 2021, with occupancy dropping slightly by 0.5%. While luxury hotels saw a 3.1% increase in demand, economy hotels lost 2.4%, and urban markets benefited from higher demand in upper-tier segments. Houston led in RevPAR growth at over 31%, boosted by demand from the oil and gas industry and hurricane-displaced residents, while San Francisco and Nashville saw the largest RevPAR declines. With the Fed easing interest rates, hotel construction may increase, though likely not until 2026. Looking to Q4, high-end hotels are expected to benefit from leisure and group bookings, but overall growth is to remain weak. (Source: CoStar, 2024)

·Equinix, GIC, and CPP Investments launch $15 Billion U.S. Data Center expansion. Equinix has announced a joint venture with GIC Real Estate and the Canada Pension Plan Investment Board (CPP Investments) to invest over $15 billion in U.S. data centers. This partnership aims to expand Equinix's xScale data center portfolio, tripling its capital base to meet surging demand for hyperscale facilities fueled by AI and cloud computing growth. The collaboration includes plans for large data center campuses with over 100-megawatt capacity, adding 1.5 gigawatts of new power for tech clients. Recent acquisitions for sites in Atlanta and Dallas mark Equinix's first large-scale campus expansions under this venture. Equinix’s longstanding collaboration with GIC and this new partnership with CPP Investments highlight the intensifying demand in the data center market, with low vacancy rates and high prelease rates. Despite data center supply growth in primary markets of 24% year-on-year, overall vacancy has hit a record low with 80% of the 3,872 MW under construction in US primary markets already being preleased. (Source: Equinix, GIC, CPP, CoStar, 2024)

Equinix adds CPP Investments to its joint venture

·Marriott expands City Express brand into U.S. and Canada. Marriott International is expanding its City Express by Marriott brand into the U.S. and Canada, marking the brand’s first venture outside Latin America. This move follows Marriott's $100 million acquisition of the City Express portfolio in 2023, which includes 152 midscale hotels across Mexico, Costa Rica, Colombia, and Chile. The expansion is part of Marriott's strategy to strengthen its midscale offerings, catering to cost-conscious travelers with affordable lodging options. Marriott expects signed agreements and possible hotel openings in North America within the coming months. The City Express brand features a conversion-friendly model and is expected to attract hotel investors looking for midscale properties in these markets. Marriott continues to capitalize on guest and owner demand for efficient and affordable lodging solutions. (Source: Hotel News Now, CoStar, 2024)

City Express by Marriott brand to enter US and Canada market

Europe

·Australia’s Aware Super and Delancey partner on £1 Billion UK real estate venture, starting with Central London offices. Aware Super, one of Australia’s largest superannuation funds, and Delancey, UK asset manager, have launched a £1 billion UK real estate investment platform, with an initial focus on prime central London office properties. The partnership aims to generate strong, risk-adjusted returns, leveraging demand for sustainable and high-quality office spaces amid market repricing and supply shortages. Aware Super’s Damien Webb, now based in London, leads the initiative as part of Aware’s broader £5.25 billion commitment to UK and European real estate. Sustainability is central, as the platform will integrate decarbonization efforts across acquisitions and developments. Besides central London offices, Aware and Delancey are exploring undervalued retail, logistics, and mixed-use properties in the UK. The partnership aligns with Aware Super’s growing European footprint, following its stake in UK-based Get Living and recent investments in green energy and digital infrastructure. (Source: CoStar, Aware Super, Delancey, 2024)

·UK Industrial investment volumes surge past pre-COVID levels amid renewed optimism for Big Box warehouses. Industrial investment volumes in the UK reached £1.2 billion in Q3 2024, totaling £4.4 billion year-to-date and surpassing pre-COVID levels by 8%, according to DTRE. Analysts forecast a new investment cycle as anticipated rate cuts should ease capital market conditions, with the Bank of England’s recent rate cuts already enhancing investor confidence. The largest Q3 deals included Prologis’ £125 million acquisition of Western Avenue Business Park and Pontegadea’s first UK logistics asset purchase near Heathrow for £65.5 million. Leasing activity saw robust demand, especially from retailers, pushing big box warehouse take-up to 18.4 million square feet, led by Tesco and B&M. Despite high demand, the vacancy rate held at 6.8%, with 8.19 million square feet of speculative space under construction. The final quarter is expected to see increased investment, driven by competitive demand for quality assets and additional monetary easing measures. (Source: DTRE, CoStar, Green Street, 2024)

Prologis’ £125m acquisition of Western Avenue Business Park

·UK commercial property lending gains momentum with strong H1 performance. Lending for commercial real estate in the UK reached £16.8 billion in the first half of 2024, positioning the sector to potentially exceed last year’s £32.7 billion if the pace continues. New acquisitions comprised 45% of loans, a notable rise from 28% in 2023, driven by lower loan margins and stabilising property values. UK banks led the market with £8.2 billion in new loans, while German banks were inactive, a contrast to their £2.1 billion activity in 2023. Lower inflation, coupled with the Bank of England’s recent rate cut to 5%, has increased optimism for further rate reductions, possibly enhancing borrowing conditions for commercial real estate. Loan-to-value ratios (LTVs) increased slightly but remained under 60%, with residential real estate seeing the highest LTV at 57.3%. The “beds and sheds” segments saw growth in loan books, comprising 26% in residential and 14% in industrial, while office loans declined from 26% to 23% as lenders remain cautious. The competitive loan market, driven by a mix of UK and international banks, points to improved terms for borrowers if transaction activity rises by year-end. (Source: Bayes, CoStar, Green Street, 2024)

·La Défense CEO puts together revival plan for the French capital. La Défense spans 560 hectares in western Paris and accommodates over 500 companies, yet it faces challenges from remote work trends and tightening energy performance standards. Vacancy rates have stabilised at around 14-15% (excl. grey area), with c. 1 million sqm of the total c. 4 million sqm office space becoming outdated as older, unrenovated buildings remain empty. To address this, La Défense is diversifying its tenant base, attracting life sciences and technology sectors that traditionally operated outside central Paris, and appealing to companies that might otherwise relocate beyond the city. The district is also transforming into a "15-minute city" by revitalising public spaces and introducing parks, leisure areas, and modern facilities to improve the quality of life for workers and residents. In line with environmental goals, La Défense is upgrading office towers with ESG-compliant features and improved tenant amenities, including balconies and rooftop access. La Défense projects c. €10 billion of capex investment is required to modernise vacant spaces across the next 5-10 years, some buildings are being repurposed for residential, cultural, and educational purposes, positioning La Défense as a safe, vibrant urban hub that attracts new investors and tenants. (Source: Paris, La Défense, Green Street, 2024)

La Défense CEO, Pierre-Yves Guice on La Défense, Paris

·DWS instructed by German pension giant for €1bn+ European real estate mandate, signalling the re-entry of institutional core capital into the market since 2022. Major German public pension fund, Versorgungsanstalt des Bundes und der Länder (VBL), has awarded DWS a €1 billion-plus mandate focused on sector agnostic real estate investments across Western Europe. DWS will manage and structure the fund targeting unlevered returns of c. 5-7% outside of Germany, primarily in the UK, France, and Benelux. This mandate marks a notable return of core institutional capital to the European market after a high-interest-rate environment kept core capital sidelined. Whilst there has been investment activity in the value add and core plus side of the spectrum, this is the first large institutional core capital mandate to emerge since 2022. As the ECB plans further rate cuts this year, the increased liquidity from pensions like VBL's is expected to revitalise European prime real estate deals. The move aligns with growing market optimism post-Expo Real, as institutional funds shift focus back to high-quality, core investments. (Source: Green Street, Expo Real, 2024)