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News release

New York

Jones Lang LaSalle Reports Sublease Space Options in Manhattan Have Risen Nearly 50% in Past 18 Months

Available Sublease Space in New York Tops 12 MSF at Year-end 2008


NEW YORK, March 12, 2009 — Jones Lang LaSalle’s sublease space report has revealed that the amount of available sublease space in Manhattan has risen nearly 50 percent since midyear 2007, when the credit crisis truly began to impact the financial markets.
 
Sublease options in New York totaled approximately 12 million square feet at year-end 2008, with 4 million square feet added to the market in the past 18 months. At the peak of the previous down cycle, which ran from 2001 to 2004, Manhattan posted a total of 14.4 million square feet of sublease space.
 
Jones Lang LaSalle research shows that sublease space in 24 of the nation’s top metropolitan markets reached nearly 56.4 million square feet at the end of 2008. Sublease options have climbed 28.5 percent across the nation since the second quarter of 2007 and are expected to jump further in the coming months as corporate America's more recent job cuts reduce the need for office real estate. In the fourth quarter of 2008, sublease space spiked nearly 7 million square feet from the previous quarter, and another 40 million to 50 million square feet could come to market by midyear 2009.
 
"While layoffs were announced throughout 2008, sublease options did not begin coming to the market until the latter part of the year." said James Delmonte, vice president and director of research with Jones Lang LaSalle’s New York office. "We anticipate Manhattan will see rising levels of sublease space into at least midyear 2009."
 
Leasing activity has waned significantly at the same time that sublease space has increased. In New York, leasing volume has fallen nearly 41 percent since the second quarter of 2007. Manhattan posted 4.4 million square feet of leasing activity at year-end 2008 compared to 7.5 million square feet in deal volume in the second quarter of 2007.
 
Jones Lang LaSalle found leasing volume across the U.S. has dropped 43.9 percent since the second quarter of 2007. In the fourth quarter of 2008, leasing activity totaled 27.3 million square feet across all markets tracked by Jones Lang LaSalle, a decrease of nearly 12.5 million square feet in three months or a 31.3 percent backslide.
 
According to the report, due to the increase in sublease space and slower tenant demand, the average asking rental rate for Manhattan office space fell 3.1 percent over the past two quarters, dropping to $70.19 per square foot in the final quarter of the year from $72.37 per square foot in the second quarter of 2008. Class A rents slipped 3.4 percent during the same time period, falling to $81.61 per square foot from $84.44.
 
Nationally, average rental rates dipped 2.1 percent to $28.79 per square foot, while the average Class A rate declined 1.7 percent to $32.14 per square foot during the final two quarters of 2008 — reflecting the first market-wide rent drop in more than three years. The sublease impact on direct space will further erode office rental rates and result in higher tenant-improvement allowances and increased concessions, including more months of free rent.
 
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 1.3 billion square feet worldwide.  In the New York area, Jones Lang LaSalle provides leasing and management services for nearly 45 million square feet of commercial real estate. For further information, please visit our Web site, www.joneslanglasalle.com.
 
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