Speculative development limited by wary financers that require at least 50% of a new venture to be pre-leased before committing a loan, vacancies are historic lows, rents are at historic highs and the economy is slowing. The national market has become unusual, to say the least, and the New York market particularly so. This may be what aids it in the end, though.

"Midtown vacancy should begin to increase in 2001. This increase is not a reflection of a softening market but represents a frictional increase--as tenants move to larger quarters at development projects, they leave behind significant blocks of space," the report explains in its outlook predictions for Midtown. These vacancies will "likely be leased before they are officially vacated," but as C&W predicts some will hit the market as vacancies, it predicts the rate here could hit more than 4% in 2002. The researchers also speculated that the construction of an Olympic stadium for 2012 games "could spur further West Side development and "transform Midtown."

The slight loosening of the Midtown South market is characterized as "actually good news for the overheated" submarket. Rents there have doubled in the last two years and the researchers suggest that a "more stable demand pattern should allow for healthier market practices." They predict, "Rental growth is likely to continue to be extremely strong... with average asking rents likely to break $50 per sf by the end of 2001 and surpass $54 per sf by the end of 2002." The researchers warn that this area could be hit hard in economic bad times because the tenants in the area are not "best-credit" tenants.