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Studley: healthy '91 leasing in Midtown.

Studley: Healthy '91 leasing in Midtown

1991 came to a close with 2,381,490 square feet leased in the Midtown New York area during the November/December reporting period, representing a 34 percent decrease from the 3,605,496 square feet leased during September/October.

"Nevertheless, 1991's leasing was active; the year-end total of 18,746,397 square feet leased is a solid 16.5 percent increase over the 1990 total of 16,088,156 square feet," remarked Mitchell Steir, senior managing director and co-manager of the Midtown New York office of Julien J. Studley, Inc.

The amount of space available for lease in Midtown Manhattan has increased 8 percent from 47,886,703 square feet in 1990 to 51,836,046 square feet available at the end of 1991. "Despite the steady leasing activity of the last few months, it is expected that the inventory will continue to increase as the space being vacated by tenants relocating is returned to the market," noted Steir.

In an effort to aid New York's troubled real estate industry, Mayor David Dinkins recently announced a proposal to freeze property tax rates for the next two years. While this signals a move to help the local economy and provide some stability, most remain skeptical, citing that a freeze on assessments instead of rates, coupled with no new business or personal taxes, might be more beneficial to the overall economy.

On a related note, Congress recently introduced a bill that would change the "passive loss" rules by permitting real estate professionals to use losses from rental property to offset income from other investments. "Its passage would encourage people to purchase rental properties and stabilize values by providing an incentive to renovate and upgrade," said Maurice Solomon, vice chairman and manager of Studley's Midtown office.

Major lease transactions concluded during November/December include:

* LeBoeuf, Lamb, Leiby & McRae for 223,500 square feet at 125 West 55th Street * Macmillan McGraw-Hill* for 120,000 square feet at 10 Union Square East * U.S. Sprint for 88,960 square feet at 380 Madison Avenue * Touro College for 72,000 square feet at 27 West 23rd Street * Blue Cross/Blue Shield for 41,000 square feet at 666 Third Avenue * This square footage was included in the space leased figures in the last reporting period; however, the tenant involved in this transaction was unknown at the time.

During the November/December reporting period, the Downtown New York office market experienced a 19 percent increase in leasing activity over the September/October period, with 507,344 square feet leased. "Despite this last minute surge, the year-to-date total, at 3,647,387 square feet, represents a 43 percent decrease from 1990," noted George Martin, senior vice president and manager of Studley's Downtown Manhattan office. Large deals were not common during 1991, with the bulk of leasing involving transactions under 100,000 square feet.

It is clear that the decline in employment by large institutions has severely affected the commercial real estate market. "On one hand, the economic state of the country has put pressure on landlords, but on the other hand, it has resulted in the credit investigation of tenants by building owners being performed sooner and more exhaustively than ever before," noted Martin. While tenants do have an advantage in the market, and can negotiate aggressive deals, they must be cautious about making unrealistic demands, as this can severely delay in their transactions.

Going forward into 1992, there is some material concern as to the viability of the inventory of Class B or "older" buildings. The logical repercussion to the city is the potential for the loss of some real tax revenues.

The outlook for a market recovery remains relatively pale. Furthermore, the expectation is for more of the same, and few if any analysts see a potential for a resurgence in the downtown market. "Even in the event the national economy experiences an uptick in this election year, it is not likely to affect the commercial real estate market before three to five years. The hope is that New York can, and will, gather its resources and weather the storm through 1992," said Wayne Lagary, managing director with Studley.

Top 10 New York Lease Transactions in 1991
1. Sony Corp. 700,000 s.f. 550 Madison Ave.
2. Random House 450,000 s.f. 201 E. 50th St.
3. H.I.P. 226,610 s.f. 7 West 34th St.
4. LeBoeuf, Lamb, Lieby & McRae 223,500 s.f. 125 West 55th St.
5. Credit Suisse 180,000 s.f. One Liberty Plaza
6. Katz Communications 161,650 s.f. 125 West 55th St.
7. Neuberger & Berman 126,000 s.f. 605 Third Ave.
8. The Hartford Fire Insurance Co. 122,000 s.f. 7 World Trade Center
9. Macmillan McGraw-Hill 120,000 s.f. 10 Union Square East
10. Credit Suisse 106,680 s.f. 12 East 49th St.

Source: Julien J. Studley, Inc.
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Title Annotation:Julien J. Studley Inc. statistics, Manhattan
Publication:Real Estate Weekly
Date:Feb 12, 1992
Previous Article:Russell G. Matthews.
Next Article:Donna Karan leases 335,000 sf in NJ.

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