WHERE DO YOU STAND ON CONCESSIONS?

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We all like a little something for free, and New York Cityoffice tenants are no different. We asked our readers how they feltabout concessions and they were close to being even. A stout 43% ofyou said "We're standing pat – but it's getting tough." Another 38%voted that tenants are getting what they want, while another 19%don't believe in concessions. Real Estate New York spoke with AbieHidary, president of Hidrock Realty, and he expressed the necessityof looking at each building individually.

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"I think it's very hard to just look at New York City and make ageneral rule about concessions because it depends dramatically onthe building and what you're giving and the type of landlord. Ifyou're a landlord that's pretty hands-off and going to say, 'Here'sthe space, take it the way it is,' then you've got to give sixmonths' concession, seven months' concession.

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"It's really on a case-by-case basis. We take it to a sort ofextreme. We have an architect in-house who works with tenants tobuild the space to their specs. When you're doing that, you reallydon't have to give concessions to tenants. It also depends on thetype of space and how much you have to lease. If you're in a verylarge building that has maybe 10 to 20% vacancy, then you want tothrow concessions the tenants' way.

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"A concession will never really make or break a deal. It's moreabout a tenant seeing how far he can get. If a tenant likes thebuilding and likes the deal terms, the concession is always like athrow-in. To the extent a landlord is set in his ways, I think atenant can pretty much get what he wants when it comes toconcessions.

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"I had a general rule in my buildings that if I'm giving abuild-out, I'm not giving concessions, because here I am spending$30 or $40 per sf for this particular tenant already. He shouldn'tneed two, three, four months of free rent. He's already getting alot from us as a landlord. For the last few deals we had to giveone or two months of concessions, but we deferred it to later inthe first year or early in the second year of tenancy.

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"I don't know if I'm being indicative of the rest of the market,but in our buildings in Midtown South, I'm giving one or two monthsfree on a build-out. If somebody is taking the building as is, I'llgive four months free, but that's always spread out. I'll nevermake it the first four months of the deal. If it's a renewal, ifthey're going to pay market rent, I'll give them one or two monthsfree, and that's it.

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"Right now the Midtown South market is very strong, there's nota lot of vacancy even with all the bad news in the market. You canreally hold strong. I caution against saying that this is theprevailing feeling on concessions in Manhattan or in MidtownManhattan.

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"I would say that in 2002 and 2003 it was really worse than thanit is now. Back then there were very big concession packages out inthe market. I knew of other landlords building space for $50 persf, and giving six months free rent. We're not quite there, but Icertainly see that with just about every offer we get now, they askfor and push the envelope on concessions.

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"There's still not enough space out there for tenants to be inpower. To give you an idea, our buildings in Midtown South areprobably 95% leased; in the last six months we leased about 50,000sf. So the market is still strong if you have good product. If youhave a nice building with good services, there are plenty oftenants that want to come to these types of buildings."

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