Manhattan office market remains positive.

Buoyed by a strong national economy, a soaring stock market and the rapid growth of Internet-related firms, the New York office market enjoyed one of the best years in decades. Although the figures vary from submarket to submarket, the trend remains the same: vacancies are down to extreme lows and prices are steadily rising for what space is available.

In Midtown, heightened demand for large blocks of space continues to promote new construction, which has been nearly non-existent since the mid-1990's. 5 Times Square will be the next building to rise into the Manhattan skyline. Boston Properties completed site acquisition and has signed consulting firm Ernst & Young to a 1 million square-foot lease. Earlier this year, the Durst Organization delivered 3 Times Square, the first office tower to rise in Midtown in over eight years, and the Rudin family began constructing Reuters' new U.S. headquarters, also in Times Square. Other projects breaking ground in 1999 included Bear Stearns' new headquarters being constructed on Madison Avenue and the Rock West site being developed for Morgan Stanley Dean Witter.

Midtown overall boasts an availability rate of 6.4 percent, which translated into few options, other than new construction, for large tenants such as Morgan Stanley, Reuters, Skadden Arps, Bear Steams and Ernst & Young.

The City's job growth has been robust and no market has benefited more than Lower Manhattan, where the overall availability is down to 10.9 percent from its high of 23.6 percent in 1992. Over the course of the year, over 1.8 million square feet was absorbed, total leasing volume exceeded 6 million square feet, and rental rates grew almost 5 percent to a market average of $38.41 per square foot. City agencies consummated the largest deals of the year and, as a result, accounted for nearly 15 percent of all leasing transactions on a square-footage basis. Financial services firms were active, claiming 18 percent of all deals, and companies in the information technology, new media and computer related sectors accounted for over 20 percent of all transactions. Major transactions by new media companies, such as Agency.com's 102,100 square-foot lease at 20 Exchange Place, Digital Broadcast Network's 46,000 square-foot lease at 75 Broad Street and theglobe.com's 47,000 square-foot commitment at 120 Broadway, attest to the changing image, restored strength and consequent new appeal of Downtown.

With the economy expected to remain strong throughout 2000, there is nothing on the horizon to upset the strength of New York's real estate market. Employment is rising and there is little risk of over-building, since all the new construction in progress had principal tenants lined up before ground was broken.