Brokers are toughening up to look after the little guys.

When the going gets tough, New York's City's tenant reps have to get tougher and, as unprecedented rents force many of their clients to re-think plans for office and retail space, that's just what they've been doing.

"When the time comes to renew leases, the rents in many cases have doubled and a lot of businesses need to move, down-size or close down," according to Ruth Colp-Haber, partner at Wharton Property Advisors, Inc., which specializes in advising city office tenants.

According to Colp-Haber, while large companies and lucrative businesses, such as hedge funds, are helping landlords achieve recordbreaking rents in prime office corridors such as the Plaza District, smaller, less wealthy firms are now frequently faced with some tough choices.

"It has made a broker's job harder and there's not much we can do about it," she added. "It degrades the face of New York when small law firms, finance firms and middle class businesses that can't make these fabulous rents have to shrink."

According to latest figures from Jones Lang LaSalle, average asking rental rates for high-quality office space in Midtown Manhattan have jumped by $20 psf in the past year. Tenants clamoring for space fueled a 34.6% jump in Midtown Class A rents in the fourth quarter of 2006, leaping to $78.62 psf from $58.41 psf in the fourth quarter of 2005.

"Owners with trophy assets throughout Midtown are now achieving rents in excess of $100 per square foot on average," said James Delmonte, director of research with Jones Lang LaSalle's New York office. "Penthouse and other top-flight spaces are leasing out at rates of $125 per square foot or more."

With Midtown vacancy sitting at around 6%, there is no shortage of takers for these pricey and coveted digs. Some less affluent firms are choosing to stay the course but opting for "densification" and rearranging the layout of their space so that more people fit into smaller areas. Those who do opt to seek less pricey premises are oftentimes faced with the stark realization that it will likely cost them more in the long run. If a tenant's rent increases to the extent they seek out new space at the equal cost of their current rent, then they may end up paying the same or more than they would had they chosen to stay because of the high costs associated with moving their operation, as well as renovation and build-out costs. The only answer is to find much cheaper space to end up breaking even.

According to George E. Grace, president of G.E. Grace & Company, Inc., one way he offers tenants a good office for their money is to cast the net wider than New York City. "As a broker you need to create more options by looking at a larger geographic area, even if it's an unconventional place," he said.

What's even more important to negotiating in these changing times, said Grace, is knowing the landlords and knowing which ones will be more flexible. "The REITs in general tend to be less flexible, because they have shareholders to respond to, but no one is stronger than the market," he commented.

"If people are banging down the landlord's door with offers, then the tenant has no choice but to move on, but if the landlord has not leased the space and time has gone by, then we as brokers have an opportunity to go back and re-negotiate."

It's not much different in the retail sector where, according to Robin Abrams, executive vice president of Lansco Corporation, bidding wars are not uncommon on spaces that aren't even on the market.

"These tenants will pay key money (money upfront) to an existing local tenant to terminate an existing lease or take over a location," Abrams noted.

Bleeker Street and Soho have been bidding hotbeds in recent months, according to Abrams, who cited as an example 372 Bleeker Street where multiple tenants were negotiating for a space occupied by Clary & Co. antique shop.

Fashion designer, Marc Jacobs, made an offer that met the expectation of the landlord at $300,000 only to be ousted when another retail offered $350,000 for the same spot.

"Every deal being made on Bleeker Street has a story behind it of a very aggressive negotiation process in what has become a high demand for a specific area," said Abrams.

While Madison Avenue has traditionally been an enclave of international retailers, Abrams said more and more foreign firms are now looking to locate in trendy, up-and-coming neighborhoods, particularly in the downtown markets where rents in the $300 psf bracket also act as a great incentive compared to the average $800 psf along Madison Avenue.

While the brokers are flexing their negotiating skills like never before, however, Abrams noted, "The tenants make the ultimate choice of pressing on or withdrawing."