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NewswireTODAY - /newswire/ -
Brooklyn, NY, United States, 2009/06/07 - Income-producing property sales are not taking heavy reductions while sales of vacant spaces are getting highly discounted - OptimalSpaces.com.
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Leasing activity grinds to a near halt. The Midtown Class A vacancy rate is 12.2 percent since April of this year, the highest rate since August 1996. There is 7.8 million square feet of sublease space available in Class A buildings, the most since they started keeping records in 1991. Of Midtown's 222 million square feet of office space, 30 million square feet is available. New commercial buildings, such as 11 Times Square and 510 Madison Avenue scheduled to open in a year, will add to the glut of vacant office space. Major financial firms continue to unload massive amounts of space onto the market.
Income-producing property is still valuable to investors, but vacant space is heavily discounted. Company downsizing and reductions are leading to higher vacancies and lower lease prices. The rental rates and interest rates have driven down building values which further compound building-owner bankruptcies and troubles for banks – which will lead to more job losses. Major financial firms continue to unload massive amounts of space onto the market. Citigroup is offering 300,000 square feet in Midtown for sublease from properties such as 485 Lexington Avenue. Rental price negotiations continue as landlords feel pressure of buyer’s market.
“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, canceled its plans because they could not find new tenants.
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