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News release

New York, NY.

Jones Lang LaSalle Reports Manhattan Office Market Recovery Continues to Pick Up Steam in Second Quarter of 2011

Overall average asking rents increase, overall vacancy rates decrease in all property types in Midtown, Midtown South and Downtown submarkets


NEW YORK, July 6, 2011 — Jones Lang LaSalle announced that overall average asking rental rates increased and overall vacancy rates decreased in every building class and every submarket of Manhattan's office market in the second quarter of 2011. Class A buildings in Midtown and Midtown South posted gains in rents while Class B product in both submarkets saw rates fall slightly.

“The vitality of the Manhattan office market is heavily dependent on the labor market,” said James Delmonte, vice president and director of research for Jones Lang LaSalle’s New York office. “Job growth in New York City has outpaced the rest of the nation up to this point in the recovery. While recent gains in employment are encouraging, reports point to expected declines in Wall Street employment for the remainder of the year. While the third quarter is typically the slowest in terms of activity, that could be different this year. Asking rents continue to rise despite the mixed signals in the labor market. It appears the window of opportunity is slowing closing for tenants seeking high-quality space in Manhattan.”

Midtown recorded a decrease in vacancy rates in all building classes at midyear 2011. The overall vacancy rate fell to 11.6 percent in the second quarter of 2011, an decrease of 6.5 percent from the overall vacancy rate of 12.4 percent in the first quarter of 2011. Class A vacancy rates dropped to 11.7 percent this quarter, a decrease of 8 percent from the Class A vacancy rate of 12.8 percent the previous quarter. The submarket’s Class B vacancy rate slipped to 11.4 percent at midyear 2011, a drop of 3.8 percent from the Class B vacancy rate of 11.9 percent in the first quarter of the year.

Despite a slight drop in pricing among Midtown’s Class B product, the submarket’s high-end buildings posted an increase in average asking rental rates at midyear 2011. The submarket’s Class A buildings posted rents of $67.44 per square foot in the second quarter of 2011, an increase of 1.9 percent from Class A rents of $66.16 per square foot in the first quarter of 2011. Class B buildings in Midtown saw rents of $46.62 per square feet this quarter, a decrease of less than 1 percent from Class B rates of $46.71 per square foot the previous quarter.

“Midtown saw six new leases of more than 100,000 square feet signed during the second quarter of 2011,” said Delmonte. “The largest deal was the widely reported new lease signed by Nomura to take nearly 900,000 square feet at 825 Eighth Avenue while Morrison and Foerster pre-leased 165,000 square feet at 250 West 55th Street. Continued heavy interest in Midtown’s higher-end spaces may have fueled Boston Properties’ plans to resume construction on its new office tower some time this fall.”

Midtown South not only recorded decreases in vacancy rates in all property classes for the sixth straight quarter, the submarket saw double-digit drops. The submarket’s overall vacancy rate dropped to 6.7 percent in the second quarter of 2011, a decrease of 18.1 percent from the overall vacancy rate of 8.2 percent in the first quarter of 2011. Midtown South’s Class A buildings saw vacancy rates fall to 6.5 percent this quarter, a drop of 17.1 percent from the Class A vacancy rate of 7.9 percent in the previous quarter. The submarket’s Class B vacancy rate dropped to 6.8 percent at midyear 2011, a decrease of 18.5 percent from the Class B vacancy rate of 8.3 percent in the first quarter of the year.

Midtown South also saw a drop in average asking rents among Class B buildings at midyear 2011 while the submarket’s Class A product enjoyed rising rates. Midtown South’s top-end properties recorded rents of $48.86 per square foot in the second quarter of 2011, an increase of 3.5 percent from Class A rents of $47.20 per square foot in the first quarter of 2011. Class B buildings saw rents of $41.88 per square feet this quarter, a drop of less than 1 percent from Class B rates of $42.16 per square foot the previous quarter.

Lower Manhattan saw vacancy rates drop in all building classes for the second consecutive quarter at midyear 2011. The submarket’s overall vacancy rate fell to 11.3 percent in the second quarter of 2011, dropping 9 percent from the overall vacancy rate of 12.4 percent in the first quarter of 2011. Class A vacancy rates dropped to 9.2 percent this quarter, a decrease of 10.2 percent from the Class A vacancy rate of 10.2 percent the previous quarter. Downtown’s Class B vacancy rate fell to 14.8 percent at midyear 2011, a drop of 8.4 percent from the Class B vacancy rate of 16.2 percent in the fourth quarter of 2010. 

“The second quarter brought mixed news for the Downtown market: On the positive side were two widely reported major leases at the World Trade Center site,” said Delmonte. “Conde Nast, the publishing giant, signed a one-million-square-foot deal at One World Trade Center, while the city of New York committed to nearly 600,000 square feet at Four World Trade Center. The good news was tempered, however, by Nomura’s relocation to Midtown after vacating space at the World Financial Center.”

Unlike Midtown and Midtown South, Lower Manhattan’s Class B product recorded an increase in average asking rental rates at midyear 2011 while the submarket’s high-end product posted a slight drop in rents. High-end buildings Downtown recorded Class A rents of $41.66 per square foot in the second quarter of 2011, an drop of less than 1 percent from the Class A rate of $41.86 in the first quarter of 2011. Downtown’s Class B buildings posted average asking rental rates of $35.72 per square foot this quarter, an increase of 2 percent from the Class B rate of $35.04 per square foot the previous quarter.

Jones Lang LaSalle is a leader in the New York tri-state commercial real estate market, with more than 1,700 of the most recognized industry experts offering brokerage, capital markets, facilities management, consulting, and project and development services. In 2010, the New York tri-state team completed approximately 17 million square feet in lease transactions, completed capital markets transactions valued at $861 million, managed projects valued at more than $5.8 billion, and oversaw a property and facilities management portfolio of 83.5 million square feet.

About Jones Lang LaSalle

Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 60 countries from more than 1,000 locations worldwide, including 185 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $43 billion of assets under management. For further information, please visit our website, http://www.joneslanglasalle.com/.