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Revival of activity in office market.

Revival of activity in office market

There seems to be growing optimism among landlords and tenants that we have see the worst of the 1990 downturn that was greatly intensified by the crisis in the Gulf. Since the end of the Gulf War, there has been a very noticeable revival of activity in the office leasing market. Companies, which delayed making space commitments because of the uncertainties created by Desert Shield and Desert Storm, now seem to be hurrying to make a move.

The success of the Federal Reserve in bringing down interest rates during the first half of the year has, of course, been a cause for optimism about the economy as a whole, and the real estate sector in particular. As long as banks find the means of lending money to the business community, things will surely continue to pick up, providing impetus for further recovery and growth.

Not Out Of Woods Yet

I don't think we're out of the woods yet, but a path has opened and the office market seems to be taking it. While there is still a large amount of vacant space overhanging the market, there is also a backlog of space needs, unfilled during the Gulf crisis, that is beginning to eat away at it. through both new leases and renewals. An improving economy will also add to demand for space at the same time it helps to solve such other current difficulties as the present city, state and Federal budget problems.

It would be a mistake, though, to expect a quick return to the booming space markets of the mid-80's. At The Lincoln Building, we have always had the advantage of our location across 42nd Street from Grand Central Terminal, but we believe our constant efforts to provide the finest building services and maintenance have been equally important to our high levels of occupancy, in both good times and bad.

Renewals have always made an important contribution to reaching these levels and did so again in our semi-annual renewal period this April, helping to keep our current occupancy rate at 91 percent. That rate, though, is some 4 to 9 per cent lower than those of recent years. One of the reasons is the changed circumstances in which many of our tenants found themselves when it came time to renew. With a large roster of small to medium tenants, we always pride ourselves upon being able to accommodate different space needs when it is time for renewal. Most typically, over the years, a tenant needed to expand, but this spring a sizeable number found their business had seriously contracted and reduced their footage.

From conversations with tenants, many of them service firms, I believe smaller businesses have, in large part, been much more seriously affected by the recession than most large companies. The result is that it will be some time before they are again the factor they have been in market growth. Interestingly enough, the librarian of our Lincoln Building Law Library noticed earlier this year that more research was being done on bankruptcy law than on real estate law.

Competitive Tenants' Market

While the companies that postpone decisions about needed space until the worst uncertainties about the Gulf situation, and its effects, were clarified, and those that don't want to be left behind by exploding demand, are now moving into the market, I find that concluding a deal is very hard work.

Since gradual improvement, rather than exploding demand, seems likely for some time to come, I believe we are facing a rather extended and very competitive tenants' market. For a building to be really successful in this market, state-of-the-art facilities, excellent services will not only be rewarding, but necessary.

Amenities will be very helpful in negotiations. At The Lincoln Building, we expect to continue to benefit from our Sixty East Luncheon Club and our Law Library. Everyone in the Grand Central area, of course, benefits from the outstanding work in upgrading the area accomplished by the Grand Central Partnership, which The Lincoln Building fully supports. Most recently, we allowed our roof to be used as a platform for lights in the partnership's $3 million nighttime illumination of Grand Central Terminal, a boon both to security and esthetics.

Charles H. Spielman Vice President Helmsley-Spear, Inc. General Manager/The Lincoln Building
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Title Annotation:Mid-Year Review & Forecast Section I
Author:Spielman, Charles H.
Publication:Real Estate Weekly
Date:Jun 26, 1991
Previous Article:NY Housing Court: game without rules.
Next Article:Space being absorbed in NJ's tenant market.

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