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Studley report: midtown finds stable leasing.

Studley report: Midtown finds stable leasing

Overall leasing activity in midtown Manhattan is stable, with 3,180,104 square feet leased during the September /October reporting period. "Although this is a substantial decrease from the last two-month period, it brings the year-to-date total to 16,364,907 square feet, a 17 percent increase over the first 10 months of 1990," noted Maurice Solomon, vice chairman and manager of the Midtown New York office of Julien J. Studley, Inc. The majority of transactions completed were mid-sized, ranging from 20,000 square feet to 75,000 square feet.

A total of 50,482,511 square feet currently is available for lease in the Midtown market, an increase of 3 percent over July/August's total of 48,696,208 square feet. Of the current inventory, approximately 10.2 million square feet is sublease space. It is anticipated that as tenants continue to relocate or downsize, this inventory will increase even more.

As illustrated by the past few months, there is an appreciable amount of market activity occurring. However, the majority of these transactions have been fueled by lease expirations or lease take-overs as opposed to outright expansion," said Howard Grufferman, senior managing director and co-manager of Studley's midtown office. He added, "Tenants looking to upgrade their locations can do so without significantly altering their current real estate costs. With lenders stepping in to take over unleased projects, they will be in a better position to make extremely aggressive deals." It is expected that the market will remain stable through the end of 1991 and into 1992.

Major midtown Manhattan lease transactions concluded during this reporting period include: * Headquarters Companies for 55,000 square feet at 1120 Avenue of the Americas * Hall, Dickler, Lawler, Kent & Friedman for 39,596 square feet at 909 Third Avenue * Sanford C. Bernstein Co. for 30,548 square feet at 767 Fifth Avenue * Greython/FAO Schwartz for 29,916 square feet at 767 Fifth Avenue * American Heart Association for 27,000 square feet at 122 East 42nd Street

Downtown New York

The downtown New York office market continues to experience sluggish activity, with 425,392 square feet leased during the September/October reporting period. This represents a 34 percent decrease from the last two-month period, and a 15 percent decrease from the September/October 1990 period.

Aside from the interest of a number of smaller tenants, leasing activity in older, archaic buildings has nearly come to a halt. "A few tenants with large space requirements have spawned some unique negotiations with building owners; however, a tenant's financial stability continues to increase in importance as more and more lenders actively participate in leasing decisions," said George Martin, senior vice president and manager of Studley's downtown New York office. "As a result, the transactions that are under negotiation are taking longer to close." Similarly, building sales are almost solely dependent on cash flow and tenants' credit; therefore, virtually none of these types of transactions are being consummated.

Landlords of Downtown buildings continue to offer generous concession packages including up to one and a half years of free rent and generous tenant-improvement payments. Furthermore, average asking rental rates have fallen substantially over the last year, from $35.99 per square foot to $36.95 per square foot in new space, and from $27.74 per square foot to $26.44 per square foot in older space.

Major downtown Manhattan lease transactions completed during September /October include: * General Accident for 90,000 square feet at 199 Water Street * Quick & Reilly for 62,000 square feet at 26 Broadway * AIG for 60,000 square feet at 7 Hanover Square * Emmet, Marvin & Martin for 52,000 square feet at 120 Broadway

In an effort to attract tenants, the Downtown market, battered by the woes of the financial industry, is turning to renovation. One example of this is Chase Manhattan Bank's intention to invest more than $30 million in One Chase Manhattan Plaza, its 60-story tower at Liberty, Pine, Williams and Nassau streets. "This is with the belief that quality buildings with stable owners will be the most attractive to prospective tenants," noted Wayne LaGary, managing director in Studley's Downtown office.

In another attempt to aid the ailing downtown market, Mayor Dinkins has instructed the Department of Planning to prepare a comprehensive plan for the area, which would be completed over the next year. The plan would be the first of its kind since 1966, and many believe it is necessary if lower Manhattan is to continue to survive. One of the questions which will be addressed by the plan is how to effectively deal with outdated real estate.
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Title Annotation:Julien J. Studley, Manhattan office leases
Publication:Real Estate Weekly
Date:Nov 27, 1991
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