Markets are improving top brokers tell forum.

Two of the city's most prominent brokers provided an upbeat overview of the commercial and retail real estate markets to the National Realty Club luncheon meeting last month.

Both Williams Real Estate President and CEO Michael T. Cohen, who spoke about the office market; and the Senior Managing Director and Managing Partner of Edward S. Gordon Co., C. Bradley Mendelson, who discussed retail, see improved prices and movement in their areas.

Cohen sees the exceptional growth in the city's service economy driving leases. "New York has always been feast or famine depending on the direction of the growth," he noted. While there are no commercial cranes yet, developers are starting to line up to fulfill the demand, with office buildings being contemplated by Howard Ronson, Rockefeller Center and Richard Brodsky.

The biggest impediment to construction right now, Cohen observed, is that rents have not inched up enough to cover the costs of construction. The owner would need $30 in net income after paying operating expenses and real estate taxes, Cohen said, to make any money, and that means rents of $50 a foot or more.

Cohen sees the growth in law firms and the financial sector soaking up space, but worries about the longevity of the jobs. "We're looking at industries that have baited and switched before," he said.

The number of large spaces available on the market has also dropped from around 20 a year ago to 6 or less today. "That has an extraordinary impact on the ability to negotiate," he added. New tenants are seeing a reduction in work allowances and some buildings are kicking up asking rents, he said.

Cohen said tenants looking for 50,000 square feet below 34th Street don't have many choices, while tenants seeking rents under $25 are also having a hard time of it in Midtown. "That market has dried up," said Cohen.

He also hopes any new building expansion will be for a real need and not just an anticipated need.

Mendelson recalled that until about the second week of November 1993 "we were in real trouble." He doesn't know just what occurred, but the retail market picked up.

The city has seen an influx of the Big Box retailers, such as Bed Bath & Beyond, Daffy's and Comp USA. Others coming into the market in a strong way include TJ Maxx, Filene's, Today's Man, Staples and Barnes & Noble. Mendelson pointed to the development of Sixth Avenue below 23rd Street as a new retailing destination.

Retailers making big entrances in Midtown include the Warner Bros. store at 57th and Fifth and Nike's upcoming move to the Galeries Lafayette space across that street.

One of the problems in the past has been asking rents and rentals that were well above what the market would bear. "The reality is what you can get for the space," Mendelson explained, "perception is what you can get in a dream."

He recalled a retail tenant that signed a $175 per square-foot deal but then never paid rent. Now the space has been re--rented to tenants who pay $100 a square-foot for the ground and $20 for the basement, but they really pay.

Retail tenants cannot spend more than 10 percent of their volume on rent, he said, or they are not going to make their rent. Big stores, however, can't pay more than 1 percent.

Many owners, he added, mistakenly look for the ripple effect and hope the rents being obtained by the guy on the next block will translate into higher rents for their own location.

The next National Realty Club luncheon meeting will take place at the 60 East Club in the Lincoln Building on Nov. 14th at noon.