Boston close to 500,000 s/f deal at new tower.

The law firm Proskauer Rose LLP has reached an agreement to lease around 500,000 s/f in a new office tower being developed on Eighth Avenue by the real estate investment trust, Boston Properties. A source with knowledge of the deal said that the firm would relocate its offices into the new tower from 1585 Broadway, the firm's current New York headquarters.

Real Estate Weekly first reported the deal exclusively on its website at www.rew-online. corn on December 6.

The lease comes as many large tenants, primarily financial firms, have backed away from taking major space commitments in the face of recent economic tumult. Bear Steams, one of the first financial firms to take subprime losses when two of its funds tanked early in the summer, canceled a deal it had been considering for offices that had been occupied by the financial firm Warburg Pincus at 237 Park Avenue, a building where it already has a significant block of space.

HSBC, another loser in the subprime crisis, just announced that it will shed over 200,000 s/f at 452 Fifth Avenue. Merrill Lynch, who took among the largest balance sheet hits in the third quarter, is said to have put its decision making on a new headquarters on hold.

And Citigroup, who has taken the biggest subprime blow so far, with $17 billion in losses between the third and fourth quarters--and potentially more on the way--is rumored to be considering subleasing chunks of space around the city.

Boston Properties designed its new tower specifically for law firms however, a decision that months ago left some real estate experts scratching their heads because it was financial firms that seemed to be paying the city's highest rents and who were generally thought of as the go-to anchor tenants for new office construction.

That decision now appears to be a masterstroke. The lease with Proskauer is the second to be done in the building with a law firm, deals that have filled the majority of the tower's roughly one million square before it has even broken ground. In October, the firm Gibson Dunn took 200,000 s/f on the upper floors of the 38-story building. Rents in that deal were not disclosed, but sources say that both Gibson Dunn and Proskauer would have undoubtedly had to pay well into the triple figures for space.

In a conversation with rew-online.com about the building's design and amenities, John Powers, the New York Tri-State Region chairman of the real estate services firm CB Richard Ellis, who heads the leasing team that represents Boston Properties in leasing the Eighth Avenue tower, outlined which features had been incorporated to attract law firms.

According to Powers, the building will have modest 22,000 s/f floor-plates, far smaller than the 40,000 s/f or larger floorplates and massive trading floors that financial firms typically seek.

"In the law industry, it's gotten much more competitive to attract associates and firms lure talent with the quality of their work environment," Powers said. "Where in the past, firms used to have a large floor and just sandwich employees in windowless offices in the center of the floor, now you need to give people spaces that have windows and a smaller floor allows you to have a higher ratio of those kinds of spaces."

Powers would not comment on any leasing in the building but said that he had consulted with Boston Properties in coming up with the concept of the new building and had recommended a development geared towards law firms. The suggestion played into the firm's expertise. According to Powers, 30% of Boston Properties' portfolio is leased to law firms, tenants that the firm could shop the new space to.

Powers said that he hadn't foreseen the slowdown among financial firms, but had predicted that consolidations among law firms were making many into larger companies and into an industry more capable of anchoring major new developments.

"It was a trend that you saw throughout all service industries, but which has only started happening among law firms in recent years," Powers said. "Plus, law firms don't like to have multiple locations, they all want to be in one building, so that drives them to take a larger block of space rather than smaller leases in a number of locations."

Renderings for the building, whose address will be 250 West 55th Street, haven't been released publicly, but Powers said that the tower's slim profile allowed it to be set back from Eighth Avenue and 55th Street in a way that provides it with more light and air. The entrance to the building was located on 55th Street rather than have an Eighth Avenue address to make it more convenient to tenants, most of whom the building's planners figured would walk west down 55th Street to get to the building.

Proskauer has 12 floors at 1585 Broadway, a building owned by the real estate development company, Hines International. The building's only other tenant is Morgan Stanley. CB Richard Ellis represents Proskauer Rose.