Help from the French, but still a struggle

<i>A couple of big leasing deals, but office market still uneven</i>

It’s the French to the rescue — sort of. In the largest lease deal of the year, Paris-based financial firm Societe Generale last month agreed to take up to 560,000 square feet at 245 Park Avenue, moving east from offices on Sixth Avenue in Rockefeller Center.

And also last month, Natixis, a Paris- and Boston-based money manager, signed a 16-year deal for 182,200 square feet on the third, fourth and fifth floors at 1251 Sixth Avenue. A source said the actual starting rent was $59 per foot, and included $60 per foot in landlord improvements and 12 months of free rent.

In good times, this would be good news for Manhattan brokers. But in this market, those deals just underscored the ho-hum leasing environment.

In the SociÈtÈ GÈnÈrale deal, the bank is barely increasing the amount of space it occupies, meaning no major subtraction of space from the market, which is needed to signal a real shift in the market toward landlords.

The lease showed both the current market’s stability and its weakness, noted Andrew Simon, executive managing director at the New York City offices of NAI Global.

“[SociÈtÈ GÈnÈrale is] leaving a similar-size space behind them in a couple years, when they move out” of 1221 Sixth Avenue, Simon said. “There is no net gain. But it is activity in the market.”

Jeff Peck, a senior managing director at Studley, noted that if a tenant on a renewal goes from 100,000 square feet to 110,000 square feet, the amount of space may actually be the same. The increase is often due to loss factor, which is how landlords account for and charge tenants for costs in common spaces in buildings.

According to a Bloomberg report, SociÈtÈ GÈnÈrale currently occupies about 536,000 square feet at 1221 Sixth Avenue and will take 442,000 square feet on the third through 12th floors, and another 110,400 square feet on the 13th through 15th floors, for possible growth at 245 Park Avenue. All the space is subleased from JPMorgan Chase for 10 years.

CB Richard Ellis represented both the tenant and JPMorgan Chase. The terms of the lease were not available.

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Simon added that there were tenants looking to take the large blocks of space that will open up once the French bank departs Rockefeller Center when its lease expires in 2013.

Overall in October, leasing volume in Manhattan, according to the most recent figures available from CBRE, showed 1.8 million square feet of new office leasing, which was higher than the prior month, when 1.6 million square feet were leased. But the October figures also showed a net increase in available space, with a handful of new blocks of space added to the market, pushing the availability up slightly to 13.4 percent.

In the same period, asking rents were about flat, rising one penny to $47.75 per square foot.


Notwithstanding two large leases in November, midsize deals are driving the Midtown market, CBRE statistics show.

Four of the top five deals the firm reported closed in October were for between 50,000 square feet and 70,000 square feet, including law firms Proskauer Rose taking 61,294 square feet at 2 Penn Plaza, and Schiff Hardin moving from 900 Third Avenue to 666 Fifth Avenue.

Venable, another law firm, is now in the market for more than 60,000 square feet, being represented by Moshe Sukenik, an executive vice president at Newmark Knight Frank, and other members of his team. It is currently in about 52,000 square feet in Rockefeller Center’s 1270 Sixth Avenue, on a five-year sublease signed in 2007.

Sukenik, while not addressing his lease specifically, said in an e-mail that when a tenant has about two years left on a lease, the current landlord has an advantage. That’s in part because the tenant may have to pay double rent to cover both the new space and the space it is leaving. But as the tenant comes closer to its lease expiration, the pendulum swings to the tenant’s advantage.

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“So the smart owners often understand that they may be better off trying to negotiate a favorable deal for a tenant when they are one of only a few viable options,” he said.

Venable did not respond to requests for comment.

Simon, of NAI Global, also recently entered the market with a Sixth Avenue tenant that he would not identify. His client is interested in pursuing options in all three markets in Manhattan as well as New Jersey. Simon did not see any pressure to strike a deal quickly, and he did not see prices rising in the near term.

“I don’t believe the overall market will change dramatically in the foreseeable future,” he said.

Midtown South

Leasing volume in Midtown South remained above its five-year average in October, with smaller deals serving as the engine. But despite the active leasing, the availability rate jumped by .3 points to 13.4 percent with the addition of several major blocks of space, the largest being 198,000 square feet of direct space at the 964,000-square-foot 2 Park Avenue, between 32nd and 33rd Street.

One deal completed recently was a renewal by Greenwich House for 20,000 square feet at 122-130 West 27th Street, between Sixth and Seventh avenues.

Marco Ellman, president of Ellman Realty Advisors, represented the tenant, and said rents in the area have come down substantially in recent years.

“We actually did an early renewal,” Ellman said, “as an incentive for the landlord to cut a deal with us early.”

Ellman took his tenant to about a dozen different buildings before opting to remain in place. Although he would not provide an actual figure, he said the new rent is lower than the rent Greenwich House is currently paying.

The asking rent on the second floor of the 120,000-square-foot building is $28 per foot. The building is represented by Perry Mesmer, a senior managing director at Colliers International.

The $28 list price is below the average asking rent reported by CBRE for October. The firm reported an increase in asking rents of 46 cents per square foot, to $43.39 per foot. It said that jump was due to landlords bumping up their asking rents in the Madison Square, Park Avenue South and Flatiron District submarkets.


The waterfront views of the 42-story tower 17 State Street have lured nearly a dozen tenants over the past six months to sign leases or pre-lease agreements in the high-$40s-per-square-foot range at the building, its in-house leasing agent, Steve Morrows, said.

That actual rent price is about 20 percent higher than the average asking rent Downtown, which declined slightly by 9 cents per foot last month to $38.11 per square foot.

Morrows, a senior vice president at Aby Rosen’s RFR Realty, last month listed a number of spaces in the tower, including on the 15th and the 26th floors.

Prices in the 525,900-square-foot, Class A office tower stopped falling about six months ago, Morrows said, even as rents continued to drift lower Downtown. “They are not going down in our property. If anything, they have started to edge upwards,” he said.

Over the past half of the year, the building has signed seven new tenants for about 35,000 square feet total, and four potential tenants have lease agreements under review for another 32,000 square feet. CoStar shows a vacancy rate of about 4 percent in the building, but shows more than 113,000 square feet available for lease in the future.

For the Downtown market overall, leasing activity nearly doubled in October from the anemic levels the month prior, CBRE figures showed, from 180,000 square feet in September to 320,000 square feet in October. However, that was still below the five-year average of 380,000 square feet per month.