By Peter Shakalis
However the doom and gloom that some in the real estate community anticipated seems to be on the side lines for now. While the market has a long way to go before the return to the pre-recession days, it is holding steady. Rents in July of this year were 40% lower that they were in July 2008, however this precipitous decline has abated. Although rents remain weak, the amount of space that was leased in the second quarter of 2010, a total of 7.4 million square feet, was double the amount recorded in the second quarter 2009. Moreover, it was 42% higher than during the first quarter of 2010.
A number of business sectors were active this past quarter with law firms, finance, non-profits, quasi-government organizations and government agencies completing some substantial transactions. Law firms were responsible for a large number of lease transactions, and some of the largest transactions. During the last decade, law firms on average have accounted for 10 % of space leased in the city (as measured by square feet), however this past quarter they have accounted for over 23% of all space leased. Proskauer Rose L.L.P. took over 400,000 square feet at 11 Times Square; Willkie Farr & Gallagher signed for 355,000 square feet at 787 Seventh Avenue; and Kenyon & Kenyon renewed at One Broadway for nearly 200,000 square feet.
Leases closed by financial firms constituted just 11 percent of the total in the second quarter, while financial sector firms in recent times have occupied at least 25 percent of the total stock of space in Manhattan. It is interesting to note that at least half of the leases in the financial sector originated in the hedge and equity funds sub-segment of the industry. Investment and commercial banks were largely absent from these leasing statistics, however some recent transactions include Capital Bank One’s expansion to 140,000 square feet at 90 Park Avenue, Alliance Global Investors 213,000 square foot deal at 1633 Broadway and Piper Jaffray, an international middle market investment bank’s deal in Midtown for nearly 65,000 square feet at 345 Park Avenue.
In many cases law firms do appear to have enough clarity about their future business prospects to fix their occupancy costs now, but are taking the same amount or less space in their new leases. Even though current market conditions favor occupiers, the large investment and commercial banks however still perceive too much uncertainty about their occupancy needs to take advantage of the market.
Peter Shakalis is a Director at
FirstService Williams Real Estate
