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Midtown leasing down as Downtown activity gains.

With a mere 824,000 square-feet of total leasing market-wide in March, the Midtown market took a step back from the exceptional leasing performance recorded during February. The market's weak performance negated most of the gains the market garnered since the end of 1995, according to the Edward S. Gordon Company's March Office Market Report.

Major leases were few and far between in Midtown, with only three segments -

Grand Central, East Side and West Side - accounting for nearly 60 percent of the total activity. However, space was returned to the market with a vengeance. New availabilities greatly exceeded leasing activity resulting in 540,000 square feet of negative net absorption.

This was particularly notable in the Murray Hill segment, which experienced 215,000 square feet of negative absorption and an 18 percent jump in the total available space. In addition, the Penn/Garment area recorded 208,000 square feet of negative absorption as a result of space returned to the market at several properties, including 236,000 square feet at 450 West 33rd Street.

According to the ESG Office Market Report, Midtown asking rents declined in March. On average, asking rents fell by 15-cents to $32.39 per square foot. Park Avenue rents remain highest at $44.20, while Penn/Garment rents are lowest at $23.80.

Downtown Exceeds 300,000 SF for Third Straight Month

Powered by Zurich Center ReSource's 63.000 square-foot expansion at Chase Manhattan Plaza, and the National Development & Research Institutes' 44,000 square-foot relocation to Two World Trade Center, Downtown's leasing eclipsed the 300,000 square-foot mark for the third consecutive month.

For the first quarter, total leasing in the Downtown market exceeded one million square, compared with 930,000 square feet of leasing posted in both the third and fourth quarters of 1995.

As a result of the revived leasing activity - as well as space being taken off the market due to planned office-to-residential conversions - available space has begun to recede in the Downtown market. The availability rate dropped to 24.6 percent from the 25.1 percent charted year-end 1995. Thanks in part to the 180,000 square feet of positive net absorption recorded in March, Downtown's absorption during the first quarter stands at 483,000 square feet - a sharp contrast to the one million square feet of negative absorption during the same period a year ago.

Average asking rents in the Downtown market rose by three-cents in March to $25.57 per square foot. This is the second month in a row that average rentals have shown an increase. The World Trade Center/World Financial Center segment remained steady at $32.70 per square foot the highest average asking rent Downtown - while the Financial segment posted the lowest asking rent at $24.90 per square foot.

Smaller Transactions Dominate Midtown South

Due to the absence of mega-transactions, Midtown South has experienced a sharp decline in its leasing activity thus far in 1996. As an example, the market could only muster 129,000 square feet of total leasing during March, and for the first quarter, leasing activity totaled just 443,000 square feet. Emmis Broadcasting's 32,000 square-foot lease at 395 Hudson Street was the quarter's largest transaction, as the preponderance of Midtown South deals (64.5 percent) remain below 25,000 square feet.

Although the market as a whole posted the weakest showing since the third quarter of 1993, the Chelsea and the NoHo/SoHo segments were able to avert the slowdown and saw leasing post increases of 90 and 55 percent, respectively, over year-ago levels.

While overall leasing activity has waned, space has been returned to the market at an accelerated pace. During March, negative absorption totaled 215,000 square feet, and the availability rate vaulted from 13.2 to 13.8 percent - its highest level since early 1994.

Average asking rents in Midtown South continued to climb in March, despite the lackluster performance. Overall asking rents rose by nine-cents to $19.92 per square foot. The Park Avenue South/Madison Square segment commanded the highest asking rent at $25.20 per square foot, while the Hudson Square/TriBeCa segment had the lowest asking rents at $13.80 per square foot.
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Title Annotation:New York City real estate
Publication:Real Estate Weekly
Date:May 1, 1996
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