Speculative development limited by wary financers that requireat least 50% of a new venture to be pre-leased before committing aloan, vacancies are historic lows, rents are at historic highs andthe economy is slowing. The national market has become unusual, tosay the least, and the New York market particularly so. This may bewhat aids it in the end, though.

"Midtown vacancy should begin to increase in 2001. This increaseis not a reflection of a softening market but represents africtional increase--as tenants move to larger quarters atdevelopment projects, they leave behind significant blocks ofspace," the report explains in its outlook predictions for Midtown.These vacancies will "likely be leased before they are officiallyvacated," but as C&W predicts some will hit the market asvacancies, it predicts the rate here could hit more than 4% in2002. The researchers also speculated that the construction of anOlympic stadium for 2012 games "could spur further West Sidedevelopment and "transform Midtown."

The slight loosening of the Midtown South market ischaracterized as "actually good news for the overheated" submarket.Rents there have doubled in the last two years and the researcherssuggest that a "more stable demand pattern should allow forhealthier market practices." They predict, "Rental growth is likelyto continue to be extremely strong... with average asking rentslikely to break $50 per sf by the end of 2001 and surpass $54 persf by the end of 2002." The researchers warn that this area couldbe hit hard in economic bad times because the tenants in the areaare not "best-credit" tenants.