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Midtown office market takes off.

Fueled by three transactions exceeding 200,000 square feet, the Midtown Manhattan office market got off to a roaring start in 2004 with a January that produced 2.13 million square feet of new leasing, according to MarketView, the monthly market analysis reports published by CB Richard Ellis.

While Midtown's pace was reminiscent of the most recent leasing boom that peaked in the third quarter of 2000 and 73% greater than the five-year monthly average, leasing activity in the rest of Manhattan was substantial if not spectacular. Midtown South's 417,000 square feet and Downtown's 441,000 sq. ft. were only 6% and 13% less than the monthly averages they posted during the past five years.

Setting the pace in January was PricewaterhouseCoopers' 789,000-square-foot sublease from CIBC at 300 Madison Avenue. The removal of this large, high-priced unit from the market was responsible for a 72-cents-per-square-foot drop in Midtown's average asking rents, which otherwise would have increased by 34 cents per square foot. January's Midtown activity also included a 283,000-square-foot sublease by the law firm of Kramer, Levin, Naftalis & Frankel of space that PricewaterhouseCoopers is vacating at 1177 Avenue of the Americas and 234,000 square feet that Fairchild Publications l3eased directly at 750 Third Avenue.

Overall, January was a solid month in all three Manhattan office markets.

Highlights of CB Richard Ellis' February 2004 market reports include:

--Midtown's flurry of activity lowered its availability rate by 0.4 points in January to 13.0%. Meanwhile, Downtown's availability rate increased 0.1 point to 15.4%, and Midtown South's 12.4% availability rate represented a 0.1-point monthly drop.

--For the second consecutive month, net absorption was positive in all three Manhattan markets. Buoyed by PricewaterhouseCoopers' mammoth lease, Midtown reported 775,000 square feet of positive net absorption in January, for a two-month cumulative positive net absorption of 1.2 million square feet. Downtown had modest 38,000 square feet of positive net absorption in January, while Midtown South absorbed 93,000 square feet.

--Large blocks of available space remained plentiful at the end of January, with eight contiguous units larger than 250,000 square feet available in Midtown, six in Downtown, and three in Midtown South. Contiguous blocks between 100,000 and 250,000 square feet were even more numerous, with 57 available throughout Manhattan.

According to CB Richard Ellis' February 2004 market report for Midtown:

--Midtown's 2.13 million square feet of new leasing was 84% more than December's 1.16 million square feet, and 145% greater than January 2003's 869,000 square feet. With the exception of December 2001--an anomalous month when former World Trade3 Center tenants were scrambling to find replacement space--Midtown had not seen that much activity since May 2000. Unlike many of the past several months, large renewals were scarce in January.

The PricewaterhouseCoopers lease led to 849,000 square feet of positive net absorption in the Grand Central submarket, as well as a drop of 2.1 percentage points in that submarket's availability rate. In the Sixth Avenue/Rockefeller Center submarket. Available space totaled 25.05 million square feet at the end of January, a 3% drop for the month. Sublease space represents 38% of all availability, up from 37% in December.

According to CB Richard Ellis' February 2004 market report for downtown:

Downtown's 441,000 square feet of leasing in January was 16% less than December's 526,000 square feet but 51% greater than January 2003's 292,000 square feet. What's more, larger deals are getting done in Lower Manhattan. At 110 William Street, the New York City Economic Development Corporation renewed for 188,000 square feet and expanded into another 75,000 square feet, for a total of 263,000 square feet, while Dow Jones & Company renewed for 153,000 square feet at 1 World Financial Center. In addition, two new leases were signed in the 60,0000-square-foot range.

According to CB Richard Ellis' February 2004 market report for Midtown South:

Midtown South continued its nearly year-long rebound in January, recording a respectable 417,000 square feet of leasing activity--up 37% from December's 304,000 square feet yet 33% less than January 2003's activity. Smaller deals predominated in January, with L'Oreal's 31,000-square-foot lease at 435 Hudson Street the month's only new lease larger than 25,000 square feet. This was typical of activity during the past five months, in which all but a handful of deals were less than 50,000 square feet.

Net absorption has been consistently registering in the positive column of late, with October being the only negative mark during the last five months, during which Midtown South has absorbed 541,000 square feet.

Availability continued its decline from August's 13.1% and stood at 12.4%--Manhattan's lowest availability rate--at the end of January. Available space, which exceeded 10 million square feet as recently as May, has decreased to 9.07 million square feet at the end of January, and Midtown South remains the only Manhattan office market to register a decrease in available space over the past 12 months.
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Title Annotation:Real Estate Industry-Market Study
Publication:Real Estate Weekly
Geographic Code:1USA
Date:Mar 3, 2004
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