They included four transactions of more than 100,000 square feet each: three in Midtown and one in suburban New Jersey. And in what was reportedly the largest deal of the year, Paul, Weiss, Rifkind, Wharton & Garrison opted to stay at 1285 Ave. of the Americas. The law firm rented a total of 585,000 square feet in the 1.4 million-square-foot tower that's owned by AXA Equitable Life Insurance Co. and institutional investors advised by J.P. Morgan Asset Management.
But do these deals, and the general uptick in leasing velocity during the third and fourth quarters of '09, signal renewed traction? Michael R. Laginestra, the CB Richard Ellis vice chairman who helped negotiate Simon & Schuster's 292,000-square-foot renewal at Tishman Speyer's 1230 Ave. of the Americas, thinks so—but with some caveats.
Although a partial unfreezing of the credit markets compared to their state of paralysis a year ago has encouraged tenants to act, "there are still real problems with the underlying fundamentals—and I'm not just talking about New York City real estate, but the overall economy," Laginestra tells GlobeSt.com.
That being said, he believes the leasing momentum was no year-end blip, but will carry forth into this year, and that the first quarter of 2010 will be normally low-key, rather than nearly comatose as it was last year at this time. "I talk to my clients, and they're active; they're working deals," he says.
In its Q4 Manhattan office report released Wednesday, Jones Lang LaSalle notes that there were 25 leases of more than 100,000 square feet during the second half of '09, compared to just eight in the first six months. Among them was CBRE's just-announced 125,771-square-foot, 15-year renewal of its own lease at Tishman Speyer's 200 Park Ave., where it's been based since 1987. However, big deals or no, JLL says vacancy rates ticked upward somewhat across the three submarkets during Q4, while asking rents continued to erode.
"Despite prevailing stability in the vacancy rate, average asking rents throughout Manhattan moved lower," says James Delmonte, VP and director of research for JLL's New York office, in a release. "Adjustments in pricing have been the most dramatic among class A properties in Midtown. At $65.19 per square foot, the Midtown class A rate is down by 28% from the same time last year and off by 33% from peak in May 2008."
As to whether rents will continue to level off, Laginestra says it's going to be very much on a case-by-case basis, and adds that decline is partly a matter of perception. "If you paid $60 per foot in what should have been a $50 market, and you took 10 floors and then decided you overbought and needed to sublease one of them, you're going to say 'the market's going to continue to decline; our space is worth only $50 per foot,'" he says. "If you paid $50 per foot, you'd say the market's flat. So it's really a case of how well you negotiated your transaction."
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
