The average asking rent for office space in the northern end of Midtown has dropped significantly to $59.31 per square foot, from
$88.81 per square foot a year ago. “Tenants once priced out of Midtown
now see it as a viable destination. Demand drives deals, and we’re
seeing that play out,” said Mark Jaccom, CEO of Manhattan-based
commercial real estate services firm FirstService Williams. Other
stabilizing factors in Midtown include the amount of available
rentable space. Nearly two-thirds of the available space in Midtown is
at 450 West 33rd Street as well as the Empire State Building.
Additionally, new affordable options in Midtown and other parts of the
city have tenants flocking from downtown, which posted the largest
availability rate increase, to 13 percent up from 11.6 percent last
year, according to FirstService Williams. [more]

With the Depository Trust and Clearing Corporation’s October decision to relocate 1,600 employees from an office at 55 Water Street in Manhattan’s Financial District to New Jersey, commercial real estate experts are suggesting that other large tenants may also follow suit. Accounting group Deloitte has suggested that it may relocate as many as 1,400 jobs from its two Manhattan office locations at Two World Financial Center and 1633 Broadway, over to New Jersey or Connecticut. As office space becomes increasingly expensive, New York City landlords are struggling to hold onto office tenants, the New York Observer reported. “Depository is perhaps the first of several we may see begin to explore” offices outside Manhattan, Pat Murphy, a vice chairman at CB Richard Ellis, said.

From the November issue: The amount of free rent that landlords are offering to entice reluctant tenants to sign contracts has hit record levels in the current downturn, despite the fact that asking rents have started to stabilize in parts of the Manhattan leasing market. In the third quarter, two Midtown leases were signed with 17 and 18 months of free rent — double the average of eight and a half months, figures from the most recent report from commercial services firm CB Richard Ellis showed. Some industry professionals said even longer rent-free periods were being negotiated. “For some landlords it may be advantageous to give more free rent [but] with a higher rent [per square foot],” he said. The free rent was just one element of a soft Manhattan leasing market that saw a 1 percent decline in September asking rents. Those rents fell to $50.78 from $51.28 per square foot the month earlier, the CBRE data shows. Average asking rents are now down 29 percent from the peak of $71.92 per square foot in July 2008.

While the rest of Manhattan holds its breath for a commercial market collapse, Lower Manhattan has been experiencing dramatic ups and downs over the last nine years, according to a report
released today by Eastern Consolidated.
The market
freeze of September 2008 and the devastation of 9/11 led to a
preponderance of delayed developments and vacant retail
properties rarely seen in other neighborhoods, the report says. With more than 200 office buildings containing more than 100 million
square feet, Lower Manhattan is the third largest office submarket in
the U.S., yet the volume of office building sales has dropped dramatically in
2009, with just one office building sale so far this year. For all of last year, eight
buildings sold. During the peak year, 2007, 24 office buildings in the
neighborhood were sold. TRD [more]

The Manhattan office market isn’t looking good, as Moody’s/REAL Commercial Property Price September Indices for the borough dropped 22.9 percent between the second quarters of 2008 and 2009. The indices track the price changes of commercial real estate in 10 top U.S. markets. This figure is in line with the 21.2 percent national drop on the same scale, as analysts predict that as much as $700 billion in commercial debt could come due by 2013. Dan Fasulo, managing director at Real Capital, said that while commercial lenders look to foreclosure as an option on distressed properties, it’s not a fait accompli. “I think, at some point, if the building is not performing, if it lost a major tenant or rents went down and they can’t pay debt service, [a lender] might foreclose, but these lenders are not going to give away assets for cents on the dollar,” Fasulo said. “They are going to tuck it away in their portfolio.”

The Midtown office vacancy rate reached 17 percent this July, marking a 38 percent increase from the beginning of 2009, according to data from Tenantwise, a commercial real estate tracking group, while rent-per-square foot dropped 28 percent to $58. While some claim that the commercial real estate market in Midtown isn’t as bad as the 1970s trough, New York Magazine says that Midtown Manhattan’s skyscrapers are struggling. The result is a crop of so-called vulture investors, who hope to profit off the bottom-rung prices.

Steve Cuozzo’s Realty Check column in the New York Post offers a
reality check for followers of the New York City real estate market.
Despite claims that the market is improving, Cuozzo says reality shows
otherwise. Very few people are buying up distressed real estate, at low
prices or otherwise, and banks aren’t lending. Lenders aren’t yet
canceling and selling off loans. And while many say that vacancy rates
are not too high and that predictions of financial services firms
putting office space on the market have not come to pass, many
companies are leaving office space empty. [more]

While their larger counterparts are laying off attorneys as the recession continues, small law firms are increasing staff, according to a second-quarter report from real estate firm UGL Equis that looks at law firm real estate. But the personnel growth has not meant additional real estate transactions for law firms, the report said. The report also said that law firms occupying 5,000 square feet or more saw a 4.57 percent decrease in average asking rent. The average asking rent for law firm space is now $70.92 per square foot, more than $10 higher than the average per square foot cost of Manhattan office space overall. The largest law firm real estate transaction of the quarter was Wachtell Lipton Rosen and Katz’s renewal of 240,930 square feet at 51 West 52nd Street, according to the report. TRD [more]

From the July issue: While the entire commercial real estate scene is struggling, not all of
that struggle is created equally. Some of it is coming in the form of
giant chunks of empty space, the likes of which have not been seen in
Manhattan for decades. Whether through relocations, downsizing or
bankruptcies, huge swaths of office space on single city blocks remain
unoccupied — creating, in some instances, the urban equivalent of
massive dead zones. And the amount of available space is staggering.
Whether through relocations, downsizing or bankruptcies, huge
swaths of office space on single city blocks remain unoccupied —
creating, in some instances, the urban equivalent of massive dead
zones. And the amount of available space is staggering. more [more]

Midtown office leasing, which has taken the brunt of the current
economic downturn, will see a flurry of expiring leases in 2010, which
will help reverse the dearth of activity, a new report from commercial
brokerage CB Richard Ellis says. Midtown will see a large
increase in leasing activity in 2010 when 1,380 leases
totaling 20.3 million square feet expire, the report shows. The
Midtown office market, with 34 million square feet available for
leasing, has seen an average price cut of 16 percent for 16 million
square feet of that space since September 2008, the firm said. TRD [more]