NEW YORK CITY—Against the backdrop of strong leasing for theyear that's headed for record-setting levels, companies are makingchanges in workplace strategy that are likely to support continuinghigh levels of movement around town, CBRE officials said during apress briefing Tuesday in Midtown.

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“If leasing activity for the year maintains the pace of thefirst six months—which saw agreements signed for 15.6 millionsquare feet of space—we will reach levels for the Manhattan officemarket we haven't seen in 10 years,” said Peter Turchin, vicechairman.

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He also noted that in the first half of 2014, Downtown'savailable blocks of space spanning more than 250,000 square feetfell dramatically, from 10 to five. “That's huge, we've ever seenit drop so much in such a short period of time.”

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Renewals make up only 23% of the leasing velocity, Turchinnoted, as companies are more often deciding to get a fresh start ontheir space, which raises the issue of the most efficient workplacestrategy. “It's the topic on every tenant's mind. It comes up inevery meeting we have.”

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Adds Lenny Beaudoin, senior managing director of workplacestrategy at CBRE, “Following the recent financial crisis, we appearto be at an inflection point where top-line performance, speed andemployee workplace satisfaction, rather than bottom-line costreduction, are the goals of business.”

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In the past, he told GlobeSt.com, “About 50% to 60% of officespace was dedicated to individual offices or cubicles, 15 to 20%was “support space,” (such as for kitchens and other amenities) andthe remaining space was devoted to hallways and other “in betweenspace.”

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Now, Beaudoin stated, the ratio is more like 40% for individualareas and 30% each for the remaining two space types. However,companies are applying the savings realized by shrinking the squarefootage allocated per employee toward enhancing shared spaces,creating new work areas—such as coffeehouse or hotel-likesettings—as well as new amenities.

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“Tenants signing 10-year leases now are going to be looking torecruit people who are in the eighth grade today,” he noted. “Theexpectations of workers like that around technology are verydifferent.”

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No doubt aware of this need, companies are moving to improveddigs. Through mid-year 2014, Midtown's leasing activity jumped to8.63 million square feet from 7.37 million square feet; MidtownSouth increased to 3.41 million square feet from 2.10 millionsquare feet, and Downtown rose to 3.52 million square feet from2.46 million square feet.

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Year-to-date absorption and average asking rents also roseduring the first half of 2014. In Midtown, absorption moved intopositive territory, at 447,000 square feet, a stark contrast to thenegative 1.15 million square feet of absorption through the firsthalf of 2013. Asking rents in Midtown increased 6% over the last 12months, the largest percentage increase of the three Manhattanmarkets.

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In Midtown South, net absorption fell into negative territory at27,000 square feet but remained well ahead of the negative onemillion square feet measured through the first six months of lastyear.

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Strong second-quarter activity Downtown cancelled out negativeabsorption during the first quarter when new inventory, such as 1World Trade Center, came online. Average asking rent finished at$49.04 per square feet, compared to $48.70 per square feet in thefirst quarter and up 4% year-over-year.

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Said Turchin, “The second quarter is the first quarter since2000 in which all major indicators in Midtown, Midtown South andDowntown improved year-over-year. Although there has long been animpression that the Manhattan office market is a zero sum gamemarket, that's not true today.”

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Rayna Katz

Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.