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Class A Rents Could Dip to '04 Levels

NEW YORK CITY-Peak to trough, asking rents at trophies could decline 40% to the low $70s in Midtown and below $50 Downtown, says Jones Lang LaSalle.

By Paul Bubny | Updated on August 10, 2009

NEW YORK CITY-Trophy office properties in Manhattan could see asking rents plummet to levels not seen in five years, Jones Lang LaSalle says in a new report. They’ve dropped 18.7% to $83.66 over the past six months and have farther to fall, according to JLL’s bi-annual Skyline Review.

“We are forecasting that asking rents for Midtown class A office buildings will decline by approximately 40% from peak to trough, of which 25% has already occurred,” says James Delmonte, VP and director of research for JLL’s New York office, in a release. “Under this scenario, the Midtown trophy rent average could fall to the low $70s per square foot by 2010, and the Downtown trophy average could fall below $50.”

Delmonte notes that these lows have already been reached in some properties, “especially for sublease space.” If these low points become averages, “rents would be comparable to levels seen in 2004 and 2005, just prior to the most recent spike.” JLL notes that net-effective rents have already fallen 40% from the market peak.

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