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NEW YORK CITY-Trophy office properties in Manhattan could see asking rents plummet to levels not seen in five years, Jones Lang LaSalle says in a new report. They’ve dropped 18.7% to $83.66 over the past six months and have farther to fall, according to JLL’s bi-annual Skyline Review.

“We are forecasting that asking rents for Midtown class A office buildings will decline by approximately 40% from peak to trough, of which 25% has already occurred,” says James Delmonte, VP and director of research for JLL’s New York office, in a release. “Under this scenario, the Midtown trophy rent average could fall to the low $70s per square foot by 2010, and the Downtown trophy average could fall below $50.”

Delmonte notes that these lows have already been reached in some properties, “especially for sublease space.” If these low points become averages, “rents would be comparable to levels seen in 2004 and 2005, just prior to the most recent spike.” JLL notes that net-effective rents have already fallen 40% from the market peak.

The decline in average asking rents lagged Manhattan’s vacancy rates, which have gone up each month for the past 15 months. In the spring of 2008, space at the city’s most sought-after Midtown addresses peaked at $123 per square foot, driven by demand from hedge funds. Since then, rents in the submarket’s trophy properties have lost slightly more than 24%, falling to $88.88 per square foot from $117.46 per square foot.

For Downtown’s trophies, the decline hasn’t been as steep, according to JLL. Rent decreases there have averaged just under 7% from $64.54 to $60.23 per square foot.

Overall, Class A rents have dropped 15% in the past six months, falling to $70.63 per square foot from $83.10 per square foot. In a report issued last week, Colliers ABR put the class A average at $64.22 for July.

Manhattan’s overall class A vacancy rate climbed 30 basis points in July to 12.1%, Colliers ABR said last week. That rate was last recorded in June 1997, when the average asking rent was $34.02 per square foot.

In Midtown, class A vacancy climbed to 13.7% for the month, Colliers said. The increases were especially pronounced in the Plaza and Grand Central districts, with levels of 16.4% and 15.7%, respectively.

Downtown’s class A vacancy rose from 7.8% in June to 8.4%, according to Colliers. The company attributed the one-month jump largely to a single event: Citigroup giving up 349,000 square feet at 125 Broad St.

“Longer-term, beyond 2011, the trophy market outlook is decidedly more positive,” JLL’s Delmonte says in a release. “New construction will nearly halt over the next five years, except for scaled-back work on the World Trade Center. In the early to mid-1990s, the last time new construction was severely limited, pent-up demand caused rents to spike in the latter part of the decade. From 1995 to 2000, Midtown trophy rents increased 130%.”

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