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NEW YORK CITY-In yet another sign of the market’s softening amid the economic downturn, Boston Properties announced late Friday it will suspend construction of its one-million-square-foot office and retail project at 250 W. 55th St. in Midtown Manhattan. The REIT says the suspension results from its inability to conclude a lease transaction with a major law firm with which it had been negotiating over the past year.

The “large law firm,” reportedly Proskauer Rose, had been close to signing for around 500,000 square feet of the planned building. A release from Boston Properties says the law firm had agreed to financial terms on a lease transaction over the past year. However, the firm informed Boston Properties that it was “unable to proceed on those terms,” according to the release. As a result, the REIT deemed the Midtown project “economically infeasible in today’s environment.”

Another law firm, Gibson, Dunn & Crutcher, had agreed to take 250,000 square feet of space in the same building, according to published reports. A leasing agreement by both law firms would have secured around 70% occupancy for the building. A spokeswoman for Gibson Dunn had no comment; Proskauer Rose did not return GlobeSt.com’s calls by deadline.

As if illustrating how quickly circumstances in the current market can change, Boston Properties was saying as recently as a Jan. 29 earnings conference call that it was still in negotiations with the law firm, rare good news in a call where they warned of a “challenging” year ahead. In its SEC filing that same day, the REIT revealed that it had suspended development on a proposed tower at 740 Eighth Ave.

The structure at 250 W. 55th would have been Boston Properties’ first new project to seek a LEED Gold certified rating. Construction of the building’s foundations, which was scheduled for completion in 2011, is well underway, according to the release. Still, looking forward, the company says that it intends to “facilitate a restart of the building when it deems it propitious to do so.”

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