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Big deals spur renewed confidence.

New York's commercial real estate difficulties over the last two years have been well covered in the business and trade press. What is newsworthy now s New York is once again becoming a "big deal" town, a place where major transactions are happening.

The fact that more major transaction should take place in the months to come has led to a cautious optimism on the part of tenants, landlords and brokers.

Before I outline what the market means for those three entities, consider: in transactions of 50,000 square feet or greater in Midtown for the first five months of 1992, 1,142,494 square feet has been leased, a 28 percent increase over the corresponding period last year. Total leasing has increased 15 percent, to 6,700,954 square feet, from 5,703,736 square feet.

In the Downtown market, total leasing has increased 4 percent, to 1,704,213 square feet from 1,634,482 square feet.

Recent transactions by Scholastic, Inc., Coudert Brothers and Fish & Neave are examples of major commitments to New York. It has been well documented that a number of other major tenants are in the market, and many of them are expected to make commitments in the months to come.

Thus, opportunity exists for tenants, landlords and brokers. For all parties, timing and preparation are the keys to success.

For the tenant, with a 17 percent vacancy rate in both Midtown and Downtown, a great deal of space s on the market. Depending on size, location and other factors, more alternatives are available now than ever before in New York.

However, when tenants enter the marketplace, they can be overwhelmed by the alternatives. They need to develop a sophisticated approach that will help them sort through the market and eliminate alternative which do not meet their objectives.

With the assistance and guidance of their broker, the tenant looks at such factors as building quality, systems, environmental concerns, security, layout and landlord stability.

Once they've established criteria for their real estate needs, tenants, and their brokers, begin to look at the various alternatives. In this extremely competitive environment, tenants can begin "negotiating" with landlords before they decide on space, thus taking advantage of the market.

Landlords that are responsive and understand the competitiveness of the marketplace will succeed. Owners must correctly position their product, and be prepared to meet the needs of tenants.

If they decide to pursue a deal, the landlords must be sure to work with tenants in a timely manner, displaying not only that they have knowledge of the dynamics of the market, but they are prepared to work within the market.

What does all of this mean for the broker" In these difficult times, the broker can bring tremendous value through a strategic alliance with clients, using a multi-disciplinary approach.

The broker's primary focus is to structure a deal that lowers the tenant's occupancy costs, and in many cases, upgrades the tenant's facilities. The availability of market research data and knowledge of space on the market is crucial in this regard.

For the landlord, the leasing agent can provide guidance in a myriad of ways. When responding to an RFP, landlords need to address such issues as the economic terms of the lease, expansion/contraction rights, base building upgrade, HVAC, power requirements and signage. Landlords need the expertise of the leasing agent to respond in this competitive environment.

Brokers prepared to served the changing needs of their client will do well in this challenging market. For example, many corporations are looking to firms such as Cushman & Wakefield for real estate services on an outsourcing basis. Outsourcing occurs when corporations downsize their real estate departments and look to real estate service firms to assume responsibilities such as site selection, lease negotiation and disposition.

Brokers play a key role in this process. In addition to implementation, they are often involved with the real estate decision-making process.

Regardless of whether brokers are in an outsourcing position or more traditional role, they realize the successful transaction today is achieved when the tenant and the landlord come to an agreement which is market driven. The tenant and the tenant representative have the upper hand, but the landlord can pass on the deal. The negotiation that has all three parties satisfied is the best for all - tenant, landlord and broker.
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Title Annotation:Review and Forecast, Section II; New York, New York's commercial real estate market
Author:Vanderslice, James S.
Publication:Real Estate Weekly
Date:Jun 24, 1992
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