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The more things change, the more they stay the same.

The more things change, the more they remain the same.

That ancient axiom certainly applies to the midtown Manhattan commercial real estate market. Some things definitely have changed. Leasing has been stronger, increasing from 3.7 million square feet in the fourth quarter of 1992 to 4 million square feet in the first quarter of 1993.

We are also seeing a significant increase in the number of 150,000-plussquare-foot closed transactions. During the last six months, such major entities as Metropolitan Life, J&W Seligman and Cushman & Wakefield have made mega-deal commitments in midtown.

The "flight to quality" we've all heard about has helped several Class A buildings gain major tenants. One example is Americas Tower, at 1177 Avenue of the Americas, which in the past year has developed into a tremendous success Story.

As a result of this trend, tenants will find fewer choices for contiguous blocks of 150,000 square feet or more in the months to come. This could cause rents to rise slightly or concession packages to firm in the well located, well managed Class A buildings.

But at the same time, many things do remain the same. Despite the increase in leasing, vacancy rates remain high at about 16 percent. The outlook for New York City's economy is questionable, according to recent statistics. More than 350,000 jobs have been lost in this area since 1989, and 40,000 more are expected to be eliminated in 1993. White collar employment growth is the key to the office market recovery, and until that sector improves, we can expect vacancy rates to continue at high levels.

In addition this remains a tenants' market, particularly for the small to mid-sized user. The 10,000 to 50,000-square-foot tenant still has a plethora of choices. Significant free rent and construction concession packages continue to be the order of the day.

Overall, the Midtown market is much healthier now than in was in the dark days of 1991 when the Persian Gulf War and the subsequent recession caused leasing to come to a virtual standstill.


A few of the signs of the limited recovery that have been evident in midtown are starting to show in downtown, as well.

Although leasing overall has been weak downtown, there may be light at the end of the tunnel. For example, nine of the 17 transactions for more than 10,000 square feet during the first quarter of 1993 were either expansions or renewals. This shows that tenants are committing to the market, and taking advantage of opportunities to upgrade their facilities while decreasing their occupancy costs.

It is important to note that two of our most prestigious financial institutions have recommitted market. Bank of America's commitment at the World Trade Center and Prudential Securities lease at One New York Plaza for about 1 million square feet are major votes of confidence for Downtown.

For Manhattan as a whole, the bottom line is this: The city remains the financial and communications capital of the world. It will eventually fully recover and thrive, as it always has.

The more things change, the more they remain the same.
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Mid-Year Review & Forecast, Section I; evaluation of New York, New York commercial real estate market 1993
Author:Donohue, Richard
Publication:Real Estate Weekly
Article Type:Column
Date:Jun 23, 1993
Previous Article:Market dynamics adjust as tenants trade-up.
Next Article:ISS completes acquisition.

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