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NYC leasing sees modest increases.

NYC leasing sees modest increases

"As expected, leasing activity in Midtown New York showed a modest increase during the March/April reporting period," said Maurice Solomon, vice chairman and manager of the Midtown New York office of Julien J. Studley, Inc.

A total of 2,706,685 square feet was leased, representing a 7 percent increase over the January/February total of 2,517,169 square feet. This figure also reflects an amazing 43 percent increase over the 1,890,983 square feet leased during the sarne two-months of last year.

"However, leasing activity in new buildings continues to lag as tenants unable or unwilling to pay the rents in the city's premier buildings continue to choose older, extensively renovated projects," noted Solomon.

Law firms and foreign banks, two segments of the business community that have traditionally led the market, are still relatively stable forces in today's troubled real estate environment. This is illustrated by Credit Suis se's acquistion of seven contiguous floors in Tower 49 and Arnold & Porter's relocations to 399 Park Avenue.

A total of 50,732,382 square feet currently is available for lease in Midtown Manhattan. This is one million square feet more than the amount available during the January/February period. However, no major development projects commenced during this period.

Overall average rental rates continued to decline this period to $31.66 per square foot. However, rental rates in new buildings, at $46.04 per square foot, remain stable reflecting the lender's unwillingness to further undercut rates. Nevertheless, this figure is somewhat deceiving due to the lack of activity in new buildings this period.

"Cautiously Optimistic" best describes the prevailing outlook. "While segments of the real estate market, namely investment and residential sales, have experienced increased activity in the last quarter due in part to lower interest rates and renewed optimism in the aftermath of the Gulf war, it is generally agreed that the market will continue to slide a bit further before it corrects itself," said Solomon. The City's decision to cut real estate tax assessments on commercial property by 10 percent, though seen by some as an inadequate reduction, will still help ease matters for the majority of property owners.

Leasing activity is expected to remain fairly steady in the next two months as the balance of deals conceived in 1990 finally are consummated. The next few months will determine how well we will continue to weather this market into 1992. Manhattan south of City Hall, in older, pre-war buildings.

"This can be attributed to the attractive financial terms offered by landlords of older projects," noted George Martin, senior vice president and manager of Studlers Downtown New York office.

An interesting phenomenon occurring in Downtown Manhattan is the preponderance of non-disturbance and other clauses designed to protect tenants' rights of occupancy. "It is apparent that the current credit crunch has forced tenants to carefully examine the stability of landlords," said Martin.

Leasing activity in new space dropped substantially with only 92,744 square feet leased, representing a 67 percent decrease from the last two-month reporting period.

"This decline appears to be largely due to tenants turning to the better terms being offered by landlords of older buil&gs as well as to the better economics offered by new buil&gs along the New Jersey Waterfront," remarked Wayne LaGary, managing director.

While there are still a number of large tenants examining the marketplace, an extraordinary turnaround in activity is not expected in the near future. However, leasing activity is expected to be a little less stagnant in the next few months. Only one major transaction concluded during the March/April reporting period -- the New York Association for New Americans' 125,000-square-foot lease at 17 Battery.

Leasing activity in buildings along the New Jersey Waterfront picked up substantially during the March/April period. This is a result of several sizeable transactions including Home Insurance's 70,000-square-foot lease in Exchange Place Center as well as Mitsui Osk's 40,000-square-foot lease and Sumitomo Bank, Ltd.'s 35,000-square-foot lease in Harborside Financial Center. Furthermore, over 200,000 square feet are under negotiation in this building.
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Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Real Estate Weekly
Date:Jun 12, 1991
Previous Article:Owners reach out for better employee relations.
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