Landlords are Loosening Terms on Leases

Rental prices negotiations begin as landlords feel pressure of buyer’s market.

New York City, NY, April 20, 2009 – During this down market, commercial landlords are more willing to negotiate new and existing leases. Office and retail leasing activities continue to drop to new lows. Managing agents and landlords are now devoting a large percentage of their time working with existing tenants who are looking to downsize or renegotiate their rents.

Landlords are renegotiating leases to quickly to meet and exceed competitor offerings and customer expectations.

Rents are dropping as the commercial real estate markets react to a decrease in demand while more commercial space is added to the market weekly.

“Even though asking rents have not fallen dramatically, taking rents have dropped,” said Stephen Sunderland, managing director at Optimal Spaces, a New York tenant representative brokerage firm. “There are fewer tenants in the market and if landlords want to complete leases, they have to effectively lower the rents.”

To make the competition even stiffer, Manhattan companies that provide temporary office space are going head- to- head with firms looking for tenants to lease conventional space. The temp space agencies are lowering rents to beat out the competition. Unlike offices on the direct market, which require a 10-year lease, offices that can be temporarily leased or subleased are often smaller, may come fully furnished and offer shorter and more flexible terms. Despite this bad news, leasing negotiations this year have picked up from the near standstill in the fourth quarter of 2008.

The luxury retail downturn is apparent as the Madison Avenue vacancy rate doubled in the last month. Rents are expected to decline and the open spaces will make it possible for new retail labels to make their lines known. Investors and developers feel the strife of retail as Moinian Group and Westbrook, which purchased 475 Fifth Avenue for $162 million and planned to redevelop it, cancelled its plans because they could not find new tenants.

For the latest market research on New York City commercial real estate, contact Stephen Sunderland at Optimal Spaces or visit www.opticalspaces.com. Optimal Spaces releases a monthly analysis of the market including detailed statistics and graphs.

End.

About Optimal Spaces

Optimal Spaces is an industry leader Tenant Representative in office, retail and industrial real estate in the New York Metro market. We represent our client interest, unlike other New York City brokerage firms whose legal duty is to represent landlords. Optimal Spaces provides real estate solutions through consulting, analysis and brokerage services. Optimal Spaces brokers are all experts each with a minimum of ten years in the fields of retail, office, industrial building sales and acquisition. More information about Optimal Spaces can be found by accessing its website www.optimalspaces.com.

March 2009: New York City Office, Retail and Industrial Market Report

Office rents are off 30% from their all time highs and will continue to fall as Securities firms and banks may give up to 8 million square feet of office space in Manhattan this year. JPMorgan Chase, Citigroup and Lehman Brothers have already vacated 6.4 million feet of city office space, and Merrill Lynch is likely to give up another 5 million square feet and Smith Barney millions more feet. The available office space may reach 15.5% by the end of 2009, and the New York office market may not improve until the end of 2012.

Read more at http://www.optimalspaces.com/march-2009-manhattan-office-retail-industrial-space-rental-market-report.html

Commercial Real Estate Meltdown in Faltering Economy

Rental prices plummet and available office space skyrocket as banks and businesses vacate millions of square feet.

New York City, NY, March 20, 2009 - Office and retail rents are off 30% from their all time highs and will continue to fall as securities firms and banks may give up to 8 million square feet of office space in Manhattan this year. JPMorgan Chase, Citigroup and Lehman Brothers have already vacated 6.4 million feet of city office space, and Merrill Lynch is likely to give up another 5 million square feet and Smith Barney millions more feet. The available office space may reach 15.5% by the end of 2009, and research shows the New York office market may not improve until the end of 2012.

Asking rent reductions continue and are now down 30% from the peak last summer cycled and expected to fall an additional 20% with selected fire sales are occurring. The number of blocks of space in Midtown with dramatic price cuts quadrupled between September and December. Prices have fallen back to levels last seen in 2005. Each office job loss equates to a loss in demand for about 200-250 square feet. Despite this bad news, leasing negotiations this year have picked up from the near standstill in the fourth quarter of 2008.

“Prices are going down and will continue to do so until they reach the post-9/11 50% lows,” said Stephen Sunderland, managing director at Optimal Spaces, a New York tenant representative brokerage firm. “The next real estate meltdown will move from residential to commercial, it has already started.”

Real estate corrections in sales rental bankruptcies are starting to occur in commercial real estate where more than $1 trillion dollars of write-downs will occur in the next two to three years as cap rates rise, rents fall, and vacancy increases.

The market is not entirely pessimistic. With banks clearing out space, companies looking to expand have more options. The Durst Organization has moved into two floors at the Bank of America Tower at One Bryant Park occupying 55,000 square feet.

For the latest market research on New York City commercial real estate, contact Stephen Sunderland at Optimal Spaces or visit www.opticalspaces.com. Optimal Spaces releases a monthly analysis of the market including detailed statistics and graphs.

End.

About Optimal Spaces
Optimal Spaces is an industry leader Tenant Representative in office, retail and industrial real estate in the New York Metro market. We represent our client interest, unlike other New York City brokerage firms whose legal duty is to represent landlords. Optimal Spaces provides real estate solutions through consulting, analysis and brokerage services. Optimal Spaces brokers are all experts each with a minimum of ten years in the fields of retail, office, industrial building sales and acquisition. More information about Optimal Spaces can be found by accessing its website www.optimalspaces.com.

February Market Overview

New York Market Overview:

Consumer spending is down and an increasing number of stores are asking for reductions and deferments on their rents. Requests for rent breaks are creating problems for landlords because it's difficult to figure out which retailers really need a break and which ones are simply taking advantage of the new dynamics in the market.

Midtown office space leased in December was 60% lower than the average volume of square feet leased the same month over the past six years. There was just 550,000 square feet leased in December in Midtown, far off the December average of 1.38 million square feet.

Between July and December of 2008, sublease space in Manhattan rose to 11.2 million square feet from 7.2 million square feet. Although the financial services industry is the biggest contributor to the sublease pool, firms are also taking some of the space.

Many stores are trying to negotiate lower rents with their landlords. Office Depot is closing 112 of its 1,275 stores, and is haggling with landlords to lower rent in the ones that remain. Women's retailer Chico's has hired a consultant to renegotiate, renew or end 340 of its leases coming due in 2011. Furniture store, Pier 1 Imports, is seeking to lower lease rates on the 200 leases it has coming up for renewal in the next year.

Borders at 2 Penn Plaza are asking for permanent or temporary rent reductions through deferred payments, lower payments or leases based on a percentage of retail sales. Most national chains have a rent reduction program that may affect metro New York real estate. Tenants and landlords are negotiating over a spectrum of options that include: not paying rent in a given month to rent deferments of up to 20 percent. In the deferment cases, the amount saved would be tacked on to future years.

The amount of space taken by tenants signing lease renewals in Midtown jumped, in 2008, to more than a third of the total space leased. While the total leasing velocity in the Midtown market was down 26% to 15.5 million square feet, firms renewing their leases comprised 37% of the market, up from 20% in 2007. This trend is to continue in 2009 as firms become even more reluctant to spend money on moving and build-out expenses.

February 2009 Commercial Real Estate News

At a recent real estate conference, Vornado said that retail and high end office rents are having a negotiable factor of between 25 and 50% of asking prices.

In addition, SL Green said that office rents are projected to be down 25%. What this means to office and retail tenants is that there are deals/bargains to be had from motivated Landlords, provided that you are guided by an expert to help you get all these concessions.

January 2009 Commercial Real Estate News

Building Sales grinded to a virtual halt with only two sales over $50 million.

Office leasing was light as major corporations are taking a wait and see attitude as rents are expected to continue to fall. High end office rents should also deteriorate as fewer and fewer $100/RSF rents are achieved and more hedge fund space comes back on the market.

Retail rents should plummet as retail sales did over Christmas combined with the store closing of banks and national retailers who not only close stores but cancel or curtail new expansion as well.