Recovery not as deep as we had hoped.

While real estate in the tri-state region is definitely experiencing a long-awaited upturn, the market is not yet as recovered as many of us in the industry would like it to be. Nor is the recovery as deep as we hoped.

Work allowances and free rent have been reduced, and negotiation times are shorter, all of which are indications of an improving market. But quoted rents have not moved much in the last couple of years.

However, things are better. Much of the recovery in the Manhattan leasing market is attributable to media, publishing, super-regional banks, finance, entertainment and high-technology companies. At 1185 Avenue of the Americas, for example, we leased more than 80,000 square feet in 1996 to publishing houses Addison Wesley Longman, Inc. (a division of Pearson, PLC), and Time Venture Publishers, Inc. We also leased 25,000 square feet to Sanwa Securities, a division of the Japan-based Sanwa Bank.

Another aspect of Manhattan real estate that's very strong is its retail. As the quality of life and safety in New York City continue to improve, the number of international and national retailers that see New York City as an ideal market for new locations is increasing, and they are opening larger stores here.

Furthermore, as the city's retail presence strengthens, more destination shopping concentrations are developing in key locations with excellent mass transportation and good daytime worker and residential concentrations.

Areas such as Union Square, Broadway between 14th Street and Houston, the "Ladies Mile" along Sixth Avenue, Times Square, and Madison Avenue between 65th and 75th Streets, all have increased their number of retail stores, consisting of both core "anchor" retailers and smaller shops.

Our confidence in Manhattan's retail market is reflected in our recent purchase of a full square block of 100 percent leased retail shops as a condominium unit in Zeckendorf Towers on Manhattan's Union Square. With intensive marketing and management, we plan to bring this development up to its greatest potential.

However, Manhattan still faces obstacles in its leasing market. For example, many of the new leases in Manhattan are tenants making lateral moves and consolidating space, instead of expanding.

The Westchester and Fairfield County markets - which five years ago, were experiencing severe economic downturns - continue to attract New York tenants. Fairfield County is well on the way to a complete recovery, attracting both corporate users and entrepreneurs in the areas of finance, insurance, reinsurance, shipping and real estate. Westchester County is very much on track to making a full recovery.

What's more, tenants, both in Manhattan and the suburbs, are requiring more than ever from property owners and managers. In order to meet the challenge of increasing demands for service and guidance, we have developed a corporate philosophy of profiting by solving occupancy problems, rather than simply buying and marketing real estate.

Accordingly, we have created a turn-key deal-making system that meets brokers' and tenants' needs for more leg work and decision-making assistance. Our system assures that answers to all questions, and solutions to all tenant problems, are directly addressed by W&M at the marketing offices of each of our properties.

Overall, both the Manhattan and suburban markets are making a slow, but steady, recovery. However, as downsizing and outsourcing increase, the market is becoming more demanding than we have ever seen before. In order to succeed, property owners and managers will have to respond better, and faster, to tenant needs, be flexible enough to solve any tenant problems, and provide ready access to vital decisionmaking information.