Jones Lang reports continued strong leasing.

Jones Lang LaSalle has announced that Manhattan continues to benefit from strong leasing activity, although the pace at winch space is being taken off the market has slowed.

The city saw four million square feet of gross leasing activity during the second quarter of 2004, representing a nearly 50 percent drop from the 7.5 million square feet of gross leasing activity recorded in the first quarter.

Although there has been a slowdown in leasing activity, plenty of momentum remains in the market to suggest that Manhattan will surpass the 23.4 million square feet of gross leasing activity recorded for all of 2003. The real estate industry's pipeline of transactions remains strong. During the first six months of 2004, a total of 10 transactions of 200,000 square feet or larger were signed throughout Manhattan, three of winch were completed in the second quarter. That matches the total number of large deals signed during all of 2003, and a number of tenants continue to actively search the market for 200,000 square feet or larger blocks of space.

Much of the activity during the second quarter came from tenants seeking to renew their occupancy before the market improves any further. "Businesses, eyeing improving market conditions throughout Manhattan, have begun to sign early renewals to lock in favorable rental rates before rents spike," Peter G. Riguardi, president of Jones Lang LaSalle's New York office.

Mutual fund manager Dreyfus Corp. signed an early renewal for 370,000 square feet at 200 Park Avenue that included expansion space of 40,000 square feet. Wenner Media, publisher of Rolling Stone and other magazines, took 96,000 square feet in an early renewal at 1290 Avenue of the Americas for 96,000 square feet. Other large tenants that renewed early include KPMG at 345 Park Avenue and McKinsey & Company looking to renew at 55 East 52nd Street.

Downtown saw an increase in leasing activity but the submarket saw fewer large deals than Midtown. Class A vacancy rates fell slightly at midyear 2004, with positive absorption in Class A space somewhat offset by an increase in available Class B product. Class A vacancy rates Downtown dropped 5.3 percent, falling from 12.1 percent in the first quarter of the year to 11.5 percent in the second quarter. Overall vacancy rates decreased a bit less than 1 percent during the same time period, slipping from 12.6 percent to 12.5 percent.

Fueled by strong leasing, Lower Manhattan saw solid growth in rental rates in all building classes. Class A rents Downtown grew 4.5 percent, rising from $33.95 per square foot in the first quarter of 2004 to $35.45 per square foot at midyear. Overall rental rates increased 2.8 percent in the same time period, climbing from $31.86 per square foot to $32.76 per square foot.

Midtown recorded positive absorption in Class B office buildings, while Class A office product posted a slight rise in available space.

Several new Class A buildings were delivered to the market in Midtown in the second quarter, helping to push up vacancy rates.

The 1.24 million square foot Times Square Tower is nearly half leased with more deals near to signing, and Bloomberg L.P. is leasing the majority of the 1.1 million square foot 731 Lexington Avenue

Midtown Class A vacancy rates increased slightly less than 1 percent, rising from 9.7 percent in the first quarter of 2004 to 9.8 percent at midyear. At the same time, overall vacancy rates decreased by a fraction of a percentage point, slipping from 10.16 percent to 10.08 percent.

Midtown rental rates increased slightly across the board in the second quarter of 2004. Class A rents expanded by 1.5 percent, increasing from $53.14 per square foot in the first quarter of the year to $53.94 at midyear.

Overall rents in Midtown grew 1.7 percent in the same time period, rising from $46.57 per square foot to $47.38 per square foot.