Aon in at 199 Water; Comptroller bumped.

Aon Corporation subleased 220,000 s/f from Wachovia last week at 199 Water Street, bumping the New York City Office of the Comptroller in the process. According to brokers involved in the deal, the Office of the Comptroller stepped aside willingly in order to facilitate the transaction, which will give Aon a strong presence downtown and contribute to the ongoing resurgence of the area's office market.

Rents for the space were $34 per s/ f. A Jones Lang LaSalle team consisting of Peter Riguardi, John Wheeler, and Chris Krantz represented Wachovia in the deal. CB Richard Ellis executive vice president Kenneth Rapp represented Aon Corporation.

Rumors abound that the Office of the Comptroller has shifted its search for roughly 250,000 s/f to 100 Church Street, one of the last buildings downtown with a massive block of available space. The Sapir Organization, formerly known as Zar Realty, is planning major capital improvements on the building, which houses government tenants the Business Integrity Commission, New York State Department of Labor, and the New York City Law Department.

The deal is the latest for a significant block of sublease space in the past year and half. Morgan Stanley subleased almost 700,000 s/f at One New York Plaza in 2005, space that was also being offered by Wachovia. The majority of downtown's sublease space has been absorbed, an important sign of progress for the market, which just a few years ago, in the wake of 9/11 and dot-com bust, was plagued by high vacancy and slackening rents. Space for sublease not only adds to supply but also is typically offered for below market rents depending on its term, which means that, in large quantities, it can stymie landlords' efforts to raise rental rates.

The string of direct deals this year has also contributed to tightening vacancy downtown, which has allowed some landlords to ratchet up rents, especially for class A space, a section of the market that is becoming increasingly scarce downtown. According to downtown brokers, Brookfield Properties has raised the average rent for its properties yet again in the past week to roughly $50 per s/f. Brookfield owns One, Two, Three, and Four World Financial Center as well as One Liberty Plaza and also One New York Plaza, a building formerly owned by Trizec. Brookfield partnered with The Blackstone Group to buy Trizec, a public REIT, for 8.9 billion in early June. Brookfield affected a high profile rent increase a little over a month ago.

Brokers say that L&L Acquisitions has also been able to increase its asking rents from $41 per s/f a few weeks ago to $45 per s/f for 195 Broadway, a downtown building it owns in partnership with GE Asset Management whose tops three floors are currently available for lease.