"The Manhattan retail market has operated in a vacuum," saidJoseph Harbert, COO of the New York Metro Region for the firm."Regardless of what's going on with the macro economy, our retailmarket is strong, and we're seeing record-setting deals."

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At year-end, Manhattan retail rental rates escalated to newheights in all submarkets. Retail rents for prime spaces, whichposses both location and branding, set records, and Harbert notedthe trend is expected to continue.

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"We've seen particular markets – including Times Square, 34thStreet, Fifth Avenue and Soho – that are rapidly escalating interms of rents," said Harbert. "Each new deal sets a newbenchmark."

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The record-breaking rental rates lifted up the entire retailmarket, with average rents for the Manhattan retail submarketsincreasing significantly year-over-year. Rents on Madison Avenue,one of Manhattan's priciest corridors, increased more than 14percent, from $954 to $1,091 per sf at the end of 2007. On theUpper West Side, rents also rose about 14% year-over-year, ending2007 at $336 per sf.

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Activity is not expected to slow in the first half of the year,Harbert said.

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"Manhattan's retail market is an anomaly," he said. "Bonuses areon the way, the residential real estate market in Manhattan has notfaltered and we still have the benefit of the internationalconsumer."

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