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NEW YORK CITY-The news for Lower Manhattan is good. Downtown has seen a substantial decrease in direct vacancy rates at midyear 2003, according to Jones Lang Lasalle. The submarket saw its direct vacancy rate improve by approximately 5.7%, falling from 9.32% at year-end 2002 to 8.79% in the second quarter of 2003.

The Downtown market reaped the benefits of 200,000 sf of positive absorption in the second quarter. Some of the larger deals signed include two leases at 55 Water St.; HIP Health Plan of New York took 486,000 sf and Teachers’ Retirement System of New York City leased 157,702 sf. In addition, Oppenheimer Funds leased 190,000 sf at 2 World Financial Center and New York City Health & Hospitals Corp. signed for 84,000 sf at 160 Water St.

“What we’ve witnessed is that the market has broken loose,” says Jones Lang LaSalle’s EVP John Wheeler. “2002 was characterized by window shopping and kicking tires, but holding off. Now, we’ve seen some fairly healthy Downtown deals.”

Health services, insurance and law firms and not-for-profits are among those interested in Lower Manhattan for the financial benefits. “No question about it, the financial incentives have great pull especially to those who are sensitive to overhead.”

“Some companies have said they want to be part of the Downtown resurgence,” adds Shirley Jaffe, vice president of economic development for the Alliance for Downtown New York Inc. “When the economy picks up there will be more growth.”

Midtown saw a slight increase of 3.4% in direct vacancy rates during the same time period, rising from 6.89% at year-end 2002 to 7.13%. There was approximately 500,000 sf of negative absorption throughout Midtown, which is comprised of the Midtown and Midtown South districts. A substantial amount of new sublease space was put on the market in the Grand Central district, including 100 Park Ave.

Rental rates continued to fall throughout Manhattan at midyear 2003, according to Jones Lang Lasalle. Building owners throughout the city were still struggling with millions of square feet of available direct and sublease space. Midtown rates have dropped below $50 per sf and Downtown rents slipped below $35 per sf.

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