As One Dotcom Buys Out of Park Ave. Lease, Ripple Effect Questioned

NEW YORK CITY-The dotcom drag continues as Internet consulting firm MarchFirst Inc. paid an undisclosed sum to terminate its 15-year lease for 280,000 sf at 225-233 S. Park Ave., a site where it planned to build a companion office for its E.17th Street site. The company recently announced layoffs of 1,000 employees or 10% of its workforce. Insignia/ESG Inc., the leasing agent, is marketing the space at $50 per sf.

This comes after Web-consulting firms, Scient, Xpedior and iXL Enterprises all announced major job cuts and office closings. Scient is a co-tenant with Jones & Day at a Tishman-Speyer property in mid-Manhattan. Lower ad budgets at dotcom firms and a lessening of demand for Internet business services are contributing to the downturn.

“I don’t have a problem with service businesses in general,” says Tony Malkin, president of W & M Properties. “But you have to look towards the credit of these businesses and how it equates to the level of risk that you are prepared to take. There is a certain risk in service businesses; there is a greater risk in service businesses in rapidly changing or evolving areas.”

“The ripple has become a splash,” he observes. “Capital markets are not funding these businesses. But this is healthy because we need the space and the workers. Companies are starved for employees.”

The ripple effect is a concern. The feeling is that the dotcom demise will be followed by a related demise by the service industries associated with them.