Rents for Midtown South class B buildings rose to $47.87 per sfin the second quarter of 2007 from $41.83 per sf in the firstquarter of 2007. The submarket was the only sector of Manhattan tosee class A rents grow at a larger pace than class B rates. MidtownSouth class A average asking rents jumped 61.1% at midyear 2007after a block of 96,000 sf of office space at 11 Madison Ave. wasput on the market with asking rents in the upper $80s. Class Aaverage asking rents in the submarket's increased to $71.18 per sffrom $44.18 per sf the previous quarter.

"With tenant interest in Manhattan office space continuingunabated, average asking rental rates will escalate further," saysJames Delmonte, VP and director of research, with Jones LangLaSalle's New York City office. "Most of New York's officesubmarkets have reached single-digit vacancy rates, and new spaceis not being added to the market fast enough to meet demand."

Midtown South should continue to see significant escalation inrental rates as it was the tightest office market in Manhattan atmidyear 2007. Trinity Real Estate's decision to convert 330 HudsonSt. to residential or hospitality use took more than 400,000 sf ofoffice space off the market. As a result, class A vacancy rates inMidtown South fell 44.4% at midyear 2007, dropping to 2.8% from 5%in the first quarter of 2007. Class B buildings saw vacancy ratesfall 29.4% during the same time period, slipping to 4.4% from5.9%.