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News release

NEW YORK, NY

Jones Lang LaSalle Reports Manhattan Trophy Buildings Cement Rent Gains As City’s Office Market Continues to Improve

Trophy-quality office product throughout New York posts second consecutive period of increases in average asking rental rates


NEW YORK, October 4, 2011 — Jones Lang LaSalle reported in its summer 2011 Skyline Review that demand for New York trophy office properties remains strong and steady despite continued economic uncertainty and volatility in the stock market. Manhattan has seen average asking rental rates for tower floors at the city’s prime addresses rise faster than any other segment of the market.

“The trophy market has shown steady improvement throughout the year and continued to outpace the rest of the Manhattan market,” said James Delmonte, vice president and director of research for Jones Lang LaSalle’s New York office. “Smaller floor plates at the top of the city’s trophy buildings are performing the best out of all other market segments. The question remains whether there is enough demand to push average trophy rents higher in the near-term. If the high amount of volatility in the market continues and asking rents are to decline, the first declines could be seen in the trophy market.”

The summer 2011 Skyline Review found that, overall, New York’s trophy office market enjoyed its second consecutive increase in average asking rental rates. The city’s top-end office buildings posted a rate boost of slightly more than 10 percent, rising to $74.95 per square foot in July 2011 from $68.09 per square foot seven months earlier.

The winter 2010 Skyline Review had reported that Manhattan saw its first increase in trophy rents since spring 2008, with rents expanding to $68.09 per square foot in December 2010 from $67.58 per square foot six months earlier. In spring 2010, high-end buildings throughout the city recorded a 1.7 percent drop in average asking rental rates for the first half of 2010.

“Demand for quality space, particularly at the top of the market, is leading the market recovery,” said Delmonte. “Base floors in Midtown trophy buildings have realized a vacancy rate of 5.2 percent, while spaces above the 25th floor have achieved an astonishing 3.5 percent — both substantially lower than the broader market.”

The summer 2011 Skyline Review determined that rents for Midtown trophy product climbed nearly 10 percent, rising to $85.15 per square foot in July 2011 from $77.65 per square foot seven months earlier. The winter 2010 Skyline Review had reported that Midtown saw its first increase in trophy rents since spring 2008, with rates expanding to $77.65 per square foot in December 2010 from $72.71 per square foot six months earlier. In comparison, in spring 2010, high-end buildings in Downtown New York saw a 1.1 percent drop in rents in the first half of 2010.

Vacancy rates among Midtown’s trophy properties have dropped significantly in the six months since the firm’s winter 2010 Skyline Review, falling from 10.1 percent at year-end 2010 to 8.5 percent in July 2011.

One leading indicator of the strength of the Midtown office market has been the number of completed transactions with starting rents greater than $100.00 per square foot. There were 28 such deals in 2011 through August. In comparison, there were a total of 19 transactions at that level in 2010, and 14 similar transactions were completed in 2009.

 “While Downtown has a much smaller inventory of trophy buildings that offer limited choices compared to Midtown, the trend there has been the same,” said Delmonte. “Lower Manhattan’s top quality buildings are signficantly outperforming the overall market. It appears that the future of trophy properties is inherently tied to Wall Street. Asking rents in trophy product show the highest levels of correlation to the S&P 500, not surprising, as the majority of tenants in trophy properties are in the financial sector.”

Lower Manhattan’s trophy buildings reported rent increases of 3.3 percent in summer 2011, rising to $49.33 per square foot in July 2011 from $47.76 per square foot seven months ago. The winter 2010 report found the submarket posted its first boost in trophy rents since spring 2008, expanding to $47.76 per square foot in December 2011 from $46.65 per square foot since months earlier. In comparison, in spring 2010, high-end buildings in Downtown New York saw a 1.1 percent drop in rents in the first half of 2010.

Vacancy rates have dropped significantly for the submarket’s trophy-quality buildings in the past seven months. Lower Manhattan’s high-end buildings saw vacancy rates of 8.3 percent in July 2011, down from 11.5 percent at the close of 2010.

Jones Lang LaSalle's Skyline Review is a proprietary report that analyzes the premier buildings in Midtown and Downtown Manhattan - those buildings that truly move the market. The company's New York Skyline Review includes buildings that meet one or more of the following criteria: built or significant renovations since 1985, high-profile location, recognized tenant profile and/or architectural significance. Some buildings do not appear in the New York Skyline Review but are tracked for statistical purposes as part of the inventory of trophy buildings. 

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 70 countries from more than 1,000 locations worldwide, including 200 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 $45.3 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com.