NY Law Firm Sees Big Reduction in Rent

The following WSJ article provides a pretty scary datapoint about the state of NYC commercial real estate market. According to the piece, the law firm Orrick, Herrington, & Sutcliffe, recently signed a lease in the CBS Headquarters building located at 51 W. 52nd Street in the low-mid 70s per square foot vs. $120-$140 per square feet for equally comparable real estate at the top of the market in 2007. Further, the landlord agreed to contribute $150 per square foot of improvements, allowing Orrick to move into the location with essentially no out of pocket expenses.

The article also quotes a Reis study that suggests that the vacancy rate in Midtown Manhattan has spiked to 10.6% vs. only 5.9% pre-Lehman (enough to fill 6 1/2 Empire State Buildings) and rents have fallen by 7.2% over a similar time period.

While evidence continues to mount that the worst of the recession is behind us, particularly in the lower end of the residential real estate market, Orrick's experience suggests that the commercial real estate downturn has only just begun.

http://online.wsj.com/article/SB124882179252188243.html