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News release

New York

Jones Lang LaSalle Reports Midtown’s Class A Vacancy Rate Reaches 15% at Midyear 2009

Midtown’s top-tier buildings post highest vacancy rate seen in 15 years


NEW YORK, July 1, 2009 — Jones Lang LaSalle announced that the New York office market is still dealing with the turbulence generated by the economic downturn impacting the country. Midtown saw vacancy rates for Class A office space reach 15 percent at midyear 2009, a level not seen in that office submarket for the past 15 years.
 
“Midtown’s Class A vacancy rate has more than doubled from a low of 7.2 percent recorded as recently as December 2007,” said James Delmonte, vice president and director of research. “There may be some signs of stability, however, as Midtown’s Class A vacancy remained in the 14.8 percent to 15.0 percent range for the past three months. In addition, as the second quarter of 2009 drew to a close, there was a noticeable increase activity throughout Manhattan, offering a positive harbinger of what may be in store for the remainder of the year.”
Four of the five largest lease transactions completed in Midtown over the past six months have been renewals. The largest was the City University of New York’s renewal of 200,000 square feet at 555 West 57th Street. The most significant new lease, in terms of square footage, was Geller & Co.’s 94,000-square-foot transaction at 909 Third Avenue.
 
Midtown posted large increases in vacancy rates in all building types. Class A vacancy rates rose to 15 percent at midyear 2009, an increase of 11.5 percent from the Class A vacancy rate of 13.5 percent recorded in the first quarter of 2009. Class B vacancy rates climbed to 13.2 percent at midyear 2009, a boost of 12.9 percent from the Class B vacancy rate of 11.7 percent seen the previous quarter.
 
Midtown also recorded the largest decreases in average asking rental rates. Class A space posted an average asking rental rate of $73.10 per square foot at midyear 2009, a drop of 10.8 percent from Class A rents of $81.92 per square foot seen in the first quarter of 2009. Class B buildings recorded rents of $50.91 per square feet at midyear 2009, a decrease of 6 percent from Class B rates of $54.16 per square foot posted in the first quarter.
 
Lower Manhattan saw the smallest increase in available space. Overall vacancy rates increased to 10.8 percent at midyear 2009, a gain of 5 percent from the overall vacancy rate of 10.3 percent posted in the first quarter of the year. The vacancy rate for Downtown Class A space rose to 8.8 percent at midyear 2009, an increase of 7.5 percent from the Class A vacancy rate of 8.2 percent seen in the first quarter of the year; the Class B vacancy rate rose to 14.3 percent, a boost of 2.5 percent from the Class B vacancy rate of 14 percent recorded the previous quarter.
 
“Downtown is clinging to a vacancy rate much lower than would be expected, with the Class A vacancy rate remaining technically within equilibrium,” said Delmonte. “Over the next 12 months, however, that rate could double as Downtown’s largest firms are expected to shed unneeded space. Since much of this is already known by the market, rents fell significantly in the first half of the year in anticipation of weakening fundamentals.”
 
Leasing activity has decreased sharply throughout Lower Manhattan over the past few years. In 2006, space users Downtown signed 10 leases greater than 100,000 square feet; in 2007, the area posted eight leases greater than 100,000 square feet; and so far this year, there have been only three such deals. The largest lease signed this year remains the China Center, which committed to 190,810 square feet at One World Trade Center, formally known as the Freedom Tower.
 
Lower Manhattan posted average asking rental rates of $46.21 per square foot for Class A buildings at midyear 2009, a decrease of 4.2 percent from Class A rents of $48.22 per square foot seen in the first quarter of 2009. Class B space Downtown posted rates of $37.21 per square foot at midyear 2009, a 3.5 percent decrease from Class B rents of $38.55 per square foot recorded in the first quarter.
 
Only Midtown South Class A buildings saw a decrease in vacancy rates this quarter. Class A space in that submarket saw vacancy rates dropped to 8.8 percent at midyear 2009, a decrease of 3.2 percent from the Class A vacancy rate of 9.1 percent posted in the first quarter of the year. Midtown South Class B buildings recorded a vacancy rate of 12.2 percent at midyear 2009, a 12.9 percent increase from the Class B vacancy rate of 10.8 percent seen in the first quarter.
 
Midtown South saw average asking rental rates of $57.61 per square foot at midyear 2009, a drop of 3 percent from the Class A rate of $59.40 per square foot posted in the first quarter of the year. Class B space recorded rents of $45.66 per square foot at midyear 2009, a decrease of 4.8 percent from the Class B rate of $47.94 per square foot posted the previous quarter.
 
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 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.4 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 $46 billion of assets under management. For further information, please visit our Web site, www.joneslanglasalle.com.
 
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