Manhattan office market remains strong in third quarter.

A vibrant economy, both locally and nationally, has kept leasing velocity strong throughout all of Manhattan during 1999. The Grand Central area has been particularly active with significant leases, such as Pfizer's lease of an additional 63,375 square feet at 150 East 42nd Street and Parker Chapin Flattau & Klimpl's 15-year lease for 103,731 square feet at the Chrysler Building.

New York Life Insurance Company has taken over 75,000 square feet of office space to house its Agency Division at 420 Lexington Avenue, and Predictive Systems, Inc., a network and integration firm, has signed a long-term lease for 30,660 square feet at 417 Fifth Avenue.

Sixth Avenue continues to sizzle. Due to a short supply of large blocks of available space, Home Box Office has opted to stay in its current headquarters, signing a 20-year lease extension at 1100 Avenue of the Americas for 350,000 square feet. Simultaneously, the cable giant has also extended its lease of approximately 243,000 square feet at the adjacent 1114 Avenue of the Americas.

Also along Sixth Avenue, Pearson, PLC, the British international media organization, has committed to a 76,000 square-foot, 15-year lease at 1330 Avenue of the Americas, and Wasserstein Perella has also expanded to take the top two floors of 1301 Avenue of the Americas, bringing their total occupancy in the building to approximately 180,000 square feet. At 1290 Avenue of the Americas, Morrison & Foerster signed a 13-year extension for 130,000 square feet that will extend their occupancy for another 16 years. This is an indication that more large tenants expect Midtown office rents to keep rising.

In the Fifth/Madison submarket, First Union's 15-year lease for 76,250 square-feet at Tower 49 and several new leases at the Dillon Read building at 535 Madison Avenue contributed to over 300,000 square feet of positive Class A absorption in the Fifth and Madison corridors. Class A buildings along Fifth and Madison continue to command premium rents, among the highest in the City.

In the Penn/Garment submarket, FortuneCity.com has signed a 10-year lease for 22,600 square feet of space at 500 Seventh Avenue, relocating from 662 Broadway. Uproar, Inc., an Internet entertainment company, has signed a five-year lease and will occupy 29,700 square feet at 240 West 35th Street. These relocations illustrate a growing trend among technology firms to migrate west as they expand.

Internet, publishing and telecommunication companies are fueling the tidal surge in Midtown South that has contributed to over one million square feet of positive net absorption year-to-date. The SoHo/NoHo submarket rose the highest during the third quarter, fueled by the largest lease transaction of the year when the international publishing and information company VNU USA absorbed 463,469 square feet at 770 Broadway; The deal prompted positive responses from bath Governor Pataki and Mayor Giuliani, undoubtedly due to the creation of 350 new jobs in the city as a consequence of the company's move.

In another notable SoHo/NoHo transaction, Enterprise Press, a printing company, signed a 10-year lease for 110,000 square feet to remain at 627 Greenwich Street. These and other mid-sized deals, such as Advanstar Communications' 83,000 square-foot lease at One Park Avenue, True North Communications' 44,000 square-foot sublet at 28 West 23rd Street and Skymall.com's sublease of 15,000 square feet at 215 Park Avenue, have caused the Midtown South availability rate to dip to 7.2 percent.

Despite increasing demand, Midtown South remains Manhattan's most affordable market. Average rents continue to rise, but remain affordable when compared to Midtown and Downtown neighbors. Realizing this, landlords have begun to upgrade and reposition older buildings, which should cause rental rates to increase as new space hits the market. Buildings such as 111 Eighth Avenue, 770 Broadway and the Starret Lehigh building are a testimony of the market's eco-nomic potency.

While Internet firms are no longer the darlings of Wall Street, they are still making waves in the Lower Manhattan office market. Major deals in the Wall Street submarket included Agencycom's lease of 102,000 square feet at 20 Exchange Place; The Street.com's 67,000 square foot commitment at 14 Wall Street; and Eclipse Trading signing on for 32,000 square feet at 100 Broadway. The Wall Street submarket has experienced the most activity thus far in 1999. Year-to-date net absorption has eclipsed 1.2 million square feet.

Despite positive net absorption this quarter, the Insurance district continues to post the highest overall availability rate in the City at 24.3 percent. However, buildings along William Street continue to attract tenants. At 100 William Street, telecommunications firm Next Venue committed to 31,000 square feet, relocating from Fort Lee, NJ, and the technology firm Eureka completed their lease of nearly 14,000 square feet.

The Broadway/Battery Park submarket has also continued to attract new tenants, but a slow recovery has kept the availability rate in the high teens.

Perhaps the most intriguing investment story this year will be the transfer of the World Trade Center from the Port Authority to someone's private sector portfolio. The agency expects to establish a list of qualified bidders and hopes to begin structuring a deal by the end of the year. Sales activity slowed considerably during the third quarter. However, notable transfers included Vornado Realty Trust's purchase of the Fuller Building at 595 Madison Avenue for approximately $125 million from L&B Realty Advisors. The Moinian Group purchased the Newsweek Building at 1775 Broadway from Midtown Realty Inc. for $130 million, and Manrock LLC, a joint venture between Brickman Associates and Rockwood Capital, purchased Centre 52 at 150 East 52nd Street for $69.5 million from Kowa Fudosan (U.S.A.) Inc. In addition, Time Equities and Bau Development teamed up to purchase 125 Maiden Lane from The RREEF USA Fund for $32.65 million.