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NEW YORK CITY-James Emden, executive managing director with Insignia/ESG, tells GlobeSt.com that it’s important to note that the current market situation is “not a disaster,” but rather, “a frustrating period.” He does say that this period will more than likely last not only through the third quarter, but the fourth as well.

“I’ve been in the business for 31 years. I was here with Edward S. Gordon and when this company became Insignia/ESG. I have been through several cycles,” he explains. “I think people are afraid; that’s the bottom line. They’re still feeling the dot-com earthquake. This is, however, completely different than the last down cycle. Here we’ve had a bubble that burst and we’re seeing the aftershocks.”

The most dramatic change in the market from last year to this Emden says is in the number of sublease deals seen now. “Subleasing is out of control,” he notes. “The sublease situation is the most difficult aspect of the market situation right now. We’re beginning to see more sublease competition, but in the long run that’s healthy. This is a correction that will stabilize the market and be good going forward beyond this summer, the third quarter and the fourth quarter.”

He does say that concessions are being seen in increasing numbers and that prices are down. “The only thing for brokers to do now is stay tuned,” he advises. “We certainly have seen a drop in pricing across the board. In broad terms prices have gone down about 10% to 15%. Concessions are beginning to increase and we’re seeing owners having to give away a little more. We’re seeing concessions even in sublease deals. For example, in a recent sublease deal the sublease tenant was granted free rent versus a cash consideration. Owners and those seeking to sublease their space will have to be a little more creative going forward.”

He’s quick to say that residential is still going “very strong” and reiterates, “I don’t see this as a disaster.” He says things will “take a longer period of time to stabilize than many people were allowing, but this is New York and New York will always be New York.

“If one looks at the total business sector picture–the stock market activity, etc.–there’s no question that there’s a tremendous scare out there,” he concludes. “It has slowed the real estate market dramatically. The question people are nervously asking is ‘Where’s the bottom?’ As soon as the psychological fears abate and the outlook improves, people will return to the table. In the meantime, there are still deals that have to be made. People have leases that are up now and the like. They may be more cautious going into a deal, but look at the construction happening now on the West Side–those properties are almost fully leased. Last time there were vacancies on the West Side. Now investors are more careful. They’ve done a good job of managing control.”

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