Brokered

The Latest J-51 Ruling Against Tishman Speyer, Stuy Town & Peter Cooper Village

2009-10-22T12:41:00.004-04:00

As you may have heard, the New York Court of Appeals upheld the Appellate Court's ruling on the deregulation of apartments at Stuyvesant Town and Peter Cooper Village. Besides the fact that I believe this ruling is incorrect, it clearly is not in the best interest of New York City and the economy.

Stay tuned as many landlords default on buildings as a result of this ruling, and the city misses out on lots of tax revenue. This, all thanks to an archaic and poorly written law that has been misinterpreted by the courts, and defined in a way that was not in the spirit of the way it was written.

Here's an article on what happened: http://www.crainsnewyork.com/apps/pbcs.dll/article?AID=/20091022/FREE/910229993/1057

Check out my old blog post on the J-51 to learn more about the background and repercussions:

http://www.brokerednyc.com/2009/03/by-virtue-of-or-stuyvesant-town-j-51.html

To learn about NYC's rent regulation practices and why they are a sham, read The Case for Deregulation.

Leasing Activity Increases – Average Transaction Size Drops 35%—Grubb & Ellis NY Third Quarter 2009 Office Market Trends

2009-10-22T12:35:00.002-04:00

Third Quarter 2009 Office Market Highlights:

• Pent up demand translates into strong leasing activity
• More deals signed this year to-date than entire 2008
• Average transaction size at 10 year low – 11,500 square feet
• Maturing loans will cast shadow for the next three years

Availability Dips—Tenants Seek Opportunities: Grubb & Ellis Manhattan Office Market Trends—September 2009

2009-09-21T11:38:00.001-04:00

September 2009 Office Market Highlights:

• Landlords continue to offer generous concessions – net effective rents remain at 2005 levels
• Uptick in leasing activity as tenants lock in lower rents
• More than 4 million square feet was leased in July and August – 35% of this year’s activity
• Availability dropped 10 basis points to 14.6% in August

Deutsche Bank Commercial Real Estate Outlook 2Q 2009

2009-08-31T11:57:00.004-04:00

Between a Rock & a Hard Place

Here are the Highlights:

Speed of deterioration in loan performance is unprecedented, even with
relative to early 1990s
Total delinquency rate reached 4.1% in June, 2.2 times higher than in March
and 3.5 times higher than December
Delinquency rates likely to soar higher over next 24+ months on billions of
dollars of pro forma loans that never stabilized and resetting partial IO loans
With 2,158 delinquent fixed rate loans ($27.9 billion) special servicers may
soon be overwhelmed
DB CMBS Research projects term losses will reach 4.3-6.3% for the
outstanding CMBS universe ($31.3-$46.4 billion), and 8.4-12.1% for the 2007
vintage
Massive maturity default risk
64.4-72.5% of loans (400-$450 billion) would not qualify to
refinance were they to survive until maturity
With well over $2 trillion in commercial mortgages maturing between now and
2013 in CMBS, banks and life company portfolios, the scale of the potential
problem is formidable
These problems are not the result of dislocated financing markets, rather they
reflect the simple fact the majority of loans do not qualify for a loan large
enough to retire the existing debt
Improvements in rents and vacancy rates are extremely unlikely to be
sufficient to materially affect the scope of the problems

For the full report, click here.

Sublease Space Drops—Net Effective Rents Reach 2005 Levels—Grubb & Ellis Manhattan Office Market Trends—August 2009

2009-08-13T16:22:00.006-04:00

August 2009 Office Market Highlights:

• Sublease space declined for the first time since November 2007
• Direct Class A net effective rents dropped to 2005 levels – averaged $54.84 PSF through July
• Robust leasing activity led to 2.75 MSF July transactions
• Availability expected to surpass 15% in next three months

Grubb & Ellis 2nd Quarter 2009 NYC Market Update

2009-07-16T14:37:00.006-04:00

Second Quarter 2009 Office Market Highlights:
• Manhattan availability rose 90 basis points in the second quarter to 14.5%
• Direct Class A average asking rents are down 19% from their 2008 market peak
• Lack of tenant demand caused leasing activity to drop 40% compared to the same time last year
•Negative absorption totaled 6.1 MSF in the first half of 2009, 50% more than recorded in 2008

Click on the picture or click here to read the full report.

Good News Friday - Turning a Corner?

2009-07-10T17:12:00.003-04:00

Turning A Corner?

If you missed “Turning a Corner” in the July 2^nd edition of The New York Times, a trip to their Web site is worth your time, particularly because the interactive version of the article is easier to follow. The article describes research done by the Organization for Economic Cooperation and Development on the relationship between industrial production, leading indicators such as consumer confidence and the stock market, and economic cycles since 1969. Noting that leading indicators have turned higher already, the OECD concludes that industrial production is about to follow. Click here to view the interactive graphic.

Several other indicators point to a near-term rebound in production, including the Institute for Supply Management’s manufacturing and non-manufacturing indexes, durable goods orders and factory orders. All of these reports show that new orders are increasing or headed in that direction, and inventories are being depleted, a combination that points to an increase in production activity.

Nonresidential private investment in structures, equipment and software accounts for less than 10 percent of GDP while personal consumption expenditures account for 70 percent, which means that businesses can’t lift the economy out of recession by themselves; they need help from consumers. Nevertheless, business spending will play a supporting role in the coming recovery, particularly as exports to faster-growing markets around the globe begin to rebound. At some point businesses will need to add workers, which will help tip the economy back into a virtuous cycle of growing employment and increased consumer demand.

Grubb & Ellis & Alan Lurie - Five Minutes on Mondays

2009-07-09T14:25:00.006-04:00

For those of you who don't know, Alan Lurie who heads up the Project Management group for Grubb & Ellis New York, is also a Rabbi. At our Monday morning meetings, Alan shares his spiritual insights, and he just came out with a book Five Minutes on Mondays. Here's a segment on Fox News discussing Grubb & Ellis, David Arena, Alan Lurie, and Alan's book.

Good News Friday (On Wednesday) Silver Lining

2009-07-08T15:08:00.003-04:00

Silver Lining

It’s tough to find the good news in this morning’s payroll employment report from the Bureau of Labor Statistics. Employers shed 467,000 jobs (net) in June, ending the four-month string of lessening monthly losses, while the unemployment rate increased a tenth of a percentage point to 9.5 percent. Job losses since the recession began now total nearly 6.5 million. Where’s the good news in that, you say?

- Keep in mind that employment is a lagging indicator and is unlikely to turn around until next year. Today’s report does not change the outlook held by a majority of economists that the recession will end later this year as GDP turns positive in the third or fourth quarters.

- A sluggish recovery should minimize the potential for an outbreak of inflation. It should help keep interest rates and oil prices low, thereby providing some support for consumer spending, the housing market and the financial sector despite the rising unemployment rate.

- A gradual recovery will provide cover for the Federal Reserve to tighten interest rates and withdraw liquidity from the credit markets in an orderly fashion. If inflation were to flare up, the Fed might need to act precipitously, thereby increasing the potential for back-to-back recessions as in the early 1980s.

- Don’t forget that the 467,000 jobs lost in June is a net number. In the third quarter of 2008 (the most recent data available from the BLS), private employers added 6.8 million jobs and eliminated 7.8 million. Of the 6.8 million jobs added, 5.5 million were at expanding businesses, and 1.3 million were at new businesses. Employers are adding new jobs all the time, and eventually, the balance will shift back into the black with more jobs created than eliminated.

-Lastly, the health care and social assistance sector keeps chugging along with 21,000 net new positions created in June. Educational services also added 13,000.

Deutsche Bank Report: The Outlook for U.S. Home Prices

2009-06-29T18:07:00.003-04:00

While I generally don't post on residential real estate, there has been a lot of buzz regarding this recent report from Deutsche Bank on the Outlook for U.S. Home prices, so I thought I would share it with you.

I'm sure you will find this report surprising in its preditions, as DB is certainly not painting a rosy outlook. They predict that U.S. home prices will decline an additional 14% from Q1 2009, and that New York home prices will drop an additional 32% to reach an affordability level in line with other markets. The report goes on to say that factoring in othe risk factors, there will be a 40.6% decline from Q1 2009 in New York.

Without further ado, here's the report. Enjoy!

Tenant Demand Stalls; Available Space Continues to Grow—Grubb & Ellis NYC Office Market Trends—June 2009

2009-06-19T09:30:00.002-04:00

June 2009 Office Market Highlights

• Leasing velocity is down 40% through May compared to one year ago

• The professional services sector accounts for 31% of 6.3 million square feet leased this year

• Availability (13.5%) and vacancy (7.8%) continue to rise

• Generous concessions and falling prices are making transactions more cost-effective for tenants

Here's the report

Good News Friday - From Bob Bach

2009-06-19T09:17:00.003-04:00

Bob Bach, Chief Economist of Grubb & Ellis has started sending out weekly Good News Friday reports to Grubb & Ellis employees (ok, he has for a few months and I haven't been on the ball). Anyway, I've decided I'm going to start passing these on for your enjoyment. We can all use a little bit of good news right now.

Trifecta of Good News

Here are three hopeful indicators released just this week:

The Conference Board Leading Economic Index rose sharply for a second consecutive month. Vendor performance, the interest rate spread, real money supply, stock prices, consumer expectations and building permits pushed the index higher in May, outweighing negative contributions from weekly hours and initial unemployment claims. Over the past six months, the index rose 1.2 percent, the first time the index has increased over a six-month period since July 2007.
The Labor Department reported that continuing jobless claims fell by 148,000 to 6.69 million during the week ending June 6^th. It was the largest decrease in seven years and breaks a string of 21 consecutive increases. Initial jobless claims rose slightly during the week ending June 13^th, however.
The American Bankers Association's economic advisory committee, a group of economists for large banks, predicted that real GDP will turn positive in the third quarter, thus bringing an end to the recession. The committee also expects housing starts to move up later this year and home values to increase moderately in 2010. Here is a link to a Bloomberg article on the committee’s findings.

Not all recent news is optimistic, and not all aspects of these indicators are positive. But this is the norm when the economic cycle is shifting from recession into recovery. Do not be surprised if the data releases are positive one day and negative the next with a gradual migration toward positive news as the recovery approaches.

If You've Ever Wondered about 190 Bowery

2009-06-18T12:19:00.002-04:00

After walking by 190 Bowery several times, perplexed by this seemingly abandoned beautiful building covered in graffitti, I finally decided to try to find out what was going on with it. What I found was so interesting, I thought I'd share this article with all of you: New York Magazine: The 72-Room Bohemian Dream House.

Deutsche Bank Commercial Real Estate Outlook 1Q 2009

2009-06-17T15:11:00.007-04:00

Sorry for the delay in getting timely information like this out there. Again, like last quarter, not too many big surprises in the DB outlook. Some items of note:

Deliquency rates on older loans have greatly increased, coming close the deliquency rates on more recent loans.
Monthly deliquencies are at a historic high.

Hotel deliquencies and retail deliquencies are way up and multi-family deliquencies are the highest to date.

Declining property prices pose a significant threat to loans needing to refinance over the next decade.

Click Here for the Report

Declining Employment; Rising Available Supply—Grubb & Ellis NYC Office Market Trends—May 2009

2009-05-20T12:58:00.001-04:00

May 2009 Office Market Highlights

• 104,200 NYC jobs cut from August 2008 (since employment peaked) through March 2009

• Available sublease space up 23% this year totaling 15.3 MSF

• Landlords using aggressive disposition strategies to lease space

• Asking rents continue to depreciate, as much as 20% in some submarkets this year alone

• Investment activity remains sluggish

• 104,200 NYC jobs cut from August 2008 (since employment peaked) through March 2009

• Available sublease space up 23% this year totaling 15.3 MSF

• Landlords using aggressive disposition strategies to lease space

• Asking rents continue to depreciate, as much as 20% in some submarkets this year alone

• Investment activity remains sluggish

Here's the report

Available Sublease Space Soars, Rents Plummet--Grubb & Ellis New York City Market Trends--First Quarter 2009

2009-04-13T16:39:00.004-04:00

First Quarter 2009 office market highlights:

Available sublease space hits 14.6 million square feet.
Sublets account for 30% of available inventory for first time since 2002.
Manhattan direct Class A average asking rents are down 8% from end of last year.
Leasing activity is down 45% as demand slows.

Here's the report

Best Market Leverage for Tenants in Decades—Grubb & Ellis Market Trends March 2009

2009-03-18T09:29:00.002-04:00

March 2009 office market highlights:

Changing real estate climate creates a tenants market.
Tenants gain leverage due to influx of supply and slowdown in demand.
Select landlords facing declining property values give tenants opportunity to renegotiate existing leases in advance of expiration.

Here's the report

"By Virtue Of" or Stuyvesant Town, Peter Cooper Village & J-51 - What it all means . . .

2009-03-17T15:29:00.009-04:00

As you may have heard, the appellate court earlier this month ruled that New York City residential buildings receiving J-51 tax benefits can not convert rent-stabilized apartments into market-rate units under the city's luxury decontrol laws under any circumstances. Further, it ruled that landlords that have done so in the past, must return the rent gains to current and former tenants.

To understand the repurcussions of this decision, you first have to understand that the J-51 tax benefits are, what they say and what they mean. If I had all the answers, I'd be very rich and influential, but I'll take a shot at making sense of it.

To put it simply, J-51 tax benefits provide tax breaks to landlords who renovate existing rental apartments. In exchange for receiving these benefits, landlords must subject the units in their buildings to rent stabilization. They may not destabilize these units until the tax benefits expire. Now . . . here's the catch. Many of the buildings that receive J-51 tax benefits already were stabilized before the landlords received the benefit.

The question is, can these units be deregulated, since they were already stabilized when the J-51 tax benefits took effect?

To answer this question, the judges went back to the rent stabilization law, which says that units are exempt from luxury decontrol if they "become" rent stabilized "by virute of" receiving J-51 tax benefits. So, the new question is, does "by virtue of" mean "solely by virtue of" - meaning that pre J-51 stabilized apts. could be destabilized or does it mean "in-part by virtue of" - meaning that no stabilized apts could be destabilized?

For what it's worth, wiktionary defines "by virtue of" as "because of; on the grounds of; by reason of; due to; based on." Based on this, it would seem to me, that only units stabilized as a result of the J-51, are restricted from destabilization. As attorney Stephen Meister (who filed an Amicus Curiae brief on behalf of the Real Estate Board of NY) notes, the fact that the law says "become" stabilized further points to the fact that the restriction on luxury decontrol does not pertain to existing stabilized buildings. Any lawyers I've asked about this, as well as the Supreme Court of NY County (based on the 2007 decision) and the DHCR (Department of Housing & Community Renewal) agree. However, this decision was overturned by the latest verdict of the appellate court. Of course, Tishman Speyer is appealing and has already been granted a stay.

So, what does this all mean to NYC real estate?

In my opinion, if the opinion of the appellate court is not overturned, it will be a horrible blow for NYC real estate. First, many landlords will have to return billions of dollars in rent overpayments to tenants and past tenants in nearly 80,000 units. Second, many of those same landlords will default on their loans, loans that were underwritten based on the successful deregulation of stabilized apartments. With landlords defaulting left and right already, this is big trouble for NYC real estate and the NYC economy.

Many of you may say, well, what about the poor lower and middle income tenants that the appellate court's interpretation of this law protects? To that I say, read my last blog post! This ruling only protects tenants who make $175,000 per year or more, who live in stabilized apartments. I can't say that I feel sorry for these "lower and middle class" people. The fact of the matter is, living in Manhattan, or NYC for the matter is not an entitlement.

The Case for Rent Deregulation

2009-03-06T09:18:00.010-05:00

Since this is a commercial real estate blog, I have avoided the topic of rent regulation, but the fact is, that rent regulation has a huge impact on real estate owners that we represent, and this is a topic that I'm passionate about, so here it goes.

First, let me explain what rent regulation is in NYC. There are 2 major forms of rent regulation - Rent Control, and Rent Stabilization - there's also public housing, Mitchell Lama, etc. - but I'm not getting into that today.

Rent control only applies to 2% of NYC apartments, and will soon cease to exist as it is limited to existing tenants and inheriting a rent controlled apartment is quite difficult. If you want to know more about rent control and MBR (Maximum Base Rent), visit: http://www.housingnyc.com/html/resources/dhcr/dhcr1.html.

Rent Stabilization applies to a whopping 48% of NYC apartments and a much higher percentage of Manhattan apartments. Rent Stabilization basically stipulates, that as long as a tenant lives in an apartment with rent under $2,000, that tenant's rent cannot be increased more than the set percentage set by the Rent Guidelines Board (RGB). That set percentage generally is somewhere between 2.5-4.5% per year. The only way an apartment can be destabilized, is if the rent on the apartment hits $2,000 AND the tenant makes $175,000 or more, or if the apt is vacated and reaches $2,000 a month. The apt can reach $2,000 a month on vacancy in a couple of ways. First, the RGB sets a higher % that an apartment's rent can be increased on vacancy. Right now that number is 17%. Second, When an apt. is vacated, a landlord can make improvements to the apartment and allocate 1/40th of the value of the improvements to the monthly rent. Therefore, if an $850 apartment is vacated, the Landlord can first raise the rent to $995 dollars. Then, the landlord can make $41,000 in improvements to the apartment. After allocating 1/40th of the improvements to the apartment, the rent is now $2,020 and Voila, the apartment is destabilized.

It seems relatively simple for a landlord to destabilize an apartment, and it is, but ONLY, if the tenant vacates, and that's the big catch. The fact of the matter is, once people get rent stabilized apartments, they don't leave . . . it's too good of a deal. This creates a system that inflates rents for everyone else. It is anti-capitalistic, prevents new residents from moving to New York City, and discriminates against the "new middle class." Don't believe me? Think of this: ONLY 1/3 OF NEW YORK CITY RENTALS ARE AT MARKET RATES. Of those, only 3% are available at any given time. To make matters worse, less than 1/3 of Manhattan rentals are at market rates, and the vacancy rate is only 2.24%.

Anyone who's taken Econ 101, or has a little bit of common sense understands the concept of supply and demand. If supply is low, the demand for what limit supply exists is inflated, and price increases. That is what happens with NYC rentals, and particularly Manhattan rentals. Imagine how much lower prices would be, if there were no more rent stabilization.

Now, it's only fair that I address the comments of advocates of rent stabilization. They claim, that if you get rid of stabilization, you will displace millions of middle class people and New York will become a city of the very rich and the very poor. Interesting theory, and to some extent it has merit, but is a cheap apartment in Manhattan an entitlement? I have many friends who would love to live in Manhattan, but cannot or choose not to because the rents are too high. Are the recent college graduate middle class less important than the middle aged entitled middle class?

Besides which, rent stabilization does nothing to protect the middle class, it just protects the status quo. If you make a million dollars a year and your stabilized apartment is $500 a month, do you get a larger increase in rent? There answer is no! Your apartment will go up 4.5% this year, the same number as everyone else. Hell, Governor Patterson, has 1 rent stabilized apartment and Representative Charlie Rangel has 3. Is that fair? Is it fair that in the same building, 1 resident has a 3 bedroom apartment for $568, and another a 1 bedroom for $2,200?

To make matters worse, the assembly just passed bills which will raise the rent at which apartments get deregulated to $5,000, and raise the income limit to $240,000.

Let's think about what would happen right now if rent stabilization were abolished.

First, stabilized tenants will be in a bind - no question.

Some would pay a higher rent and stay where they are - given the tough economy, they'd be in a much better position to negotiate with their landlords then they would have been in a year ago.
Some will move to cheaper neighborhoods or boroughs.
Some will move out of the city entirely. They will rent in the suburbs, or use the money they saved by being rent stabilized to purchase a house.

Second, increased supply in this economy will significantly decrease rents across the board.

Many people who otherwise would not think they could afford to live in NY will move here. This will bolster the NY economy and compensate for people moving out.
People at risk of losing their apartments along with their jobs will be able to stick it out a little longer and until things start to recover.

Third, landlords will raise rents in formerly stabilized apartments.

To get higher rents, landlords will need to invest significantly in their buildings and apartments. While before they had no incentive to fix up their buildings, now the incentive is clear. The blight of rundown buildings will be gone from the city.
Apartment buildings will start to sell again, and for a lot more money. Transfer taxes, capital gains and the like will be a windfall for the city of New York.
Owners that recently purchased buildings and are at risk of default will no longer default on their loans.

Fourth, higher rents will mean higher assessed values for buildings.

Higher assessments means more tax revenue for the city. This means more money to invest in jobs, infrastructure, etc.

So, you decide. Is rent stabilization a fair system? Does it really protect the middle class? Is it good for the economy? Is it good for society? Is a 3 bedroom apartment in Manhattan for $600 a month an entitlement? Is an apartment in Manhattan an entitlement?

For more on this topic read:

NY Post - My $600 a Month Prison

NY Post - The Madness of Rent Stabilization

NY Times - Rangel Defends Use of Rent Stabilized Apartments

The Village Voice - Big Changes in Rent Laws Pass Assembly

New York Magazine - The Berserkonomics of One Rent-Stabilized Apartment Building

NYC Housing Authority - http://www.housingnyc.com/downloads/research/hvs08/08summary.pdf

Goldman Sachs Buys Stake in CBRE

2009-02-10T15:06:00.004-05:00

Here's an interesting tidbit from yesterday's RealDeal:
-----------------------------------------------------------
February, 09, 2009

A unit of Goldman Sachs bought an 8.7 percent stake of real estate services company CB Richard Ellis through a stock purchase in the final quarter of 2008.

According to documents filed February 5 with the Securities and Exchange Commission, Goldman Sachs Asset Management completed the purchase of 22,882,930 shares of CBRE stock by December 31, 2008.

The purchase would be worth just under $100 million using the closing price of about $4.35 on the last day of the year, but it was unlikely it was all bought on one day.

In November, CBRE raised $207 million through the sale of 57 million shares through a secondary stock sale.

A spokesperson for California-based CBRE, Robert McGrath, declined to comment. A representative from Goldman Sachs was not immediately available for comment.

A senior research analyst for real estate at BMO Capital Markets, Paul Adornato, said prices were historically low for real estate services companies.

"It appears that Goldman Sachs Asset Management believes that over time the real estate services business will rebound and hence they bought a substantial stake in CBRE," he said.

By Adam Pincus

Starting & Running a Business in a Turbulent Economy - Feb. 5, 2009

2009-02-03T16:45:00.005-05:00

As you may know, when I'm not working as a real estate broker, I keep myself busy as Founder & Chairman of the Jewish Entrepreneurs Organization. Since the JEO has an event coming up in a couple days, I thought I'd take this opportunity to plug it!

The event is a panel session titled "Starting & Running a Business in a Turbulent Economy," and it will take place at the Stern School of Business at NYU. The panel will be moderated by the Executive Director of the Berkeley Center for Entrepreneurship at Stern, and will feature 4 distinguished entrepreneurs. They are:

Robert Davidman - CEO, EarthQuake Media
Joshua Landes - Co-Manager, Wynnefield Partners Small Cap Value L.P.
Allan Levy - Founder & CEO, SellUp Inc.
Murray Hidary - Founder of EarthWeb & iAmplify

Like our last event, we're offering a networking session afterwards with wine, beer, and dessert.

We still have a few tickets left. You can buy them at: www.jewishentrepreneurs.org.

I hope to see you at the event!

The Shadow Knows! - or, What is Shadow Space?

2009-02-02T12:56:00.006-05:00

As you can see from the Grubb & Ellis Fourth Quarter Market Trends, vacancy rates in Manhattan have increased from 4.5% to 6.6%. A big jump, yes, but it does not nearly convey the scope of the NYC commercial real estate downturn. The report goes on to say, that available space (space that isn't actually vacant now but will be available within the next 12 months) grew from 7.7% to 11.6%. This starts to tell the real story, but there is one last element that has to be accounted it for, and that is what those of us in the industry refer to as "Shadow Space."

"Shadow Space" is simply space that we believe can be rented, but is not actually on the market. This space may be occupied or may not be. There is no way to know exactly how much shadow space is available, but due to rapid downsizing at large companies throughout the city, one thing is for sure . . . there is a lot of it.

So, you may wonder, "If companies have space available to be rented, why don't they just put it on the market." Well, there are countless reasons for this, but here are a few.

1) Some companies are looking to consolidate their employees into 1 or more buildings, but they haven't decided which buildings to consolidate into. If they get an offer for their space in one building, they'll move everyone to another.

2) Real estate executives may not want to officially recognize space as available. If they do, they will be held accountable for subleasing that space and will have to report to their bosses if/when it does not get subleased.

3) If space is recognized as not being utilized, the companies will have to write it off every month that it sits, they may prefer not to do that (particularly the RE group).

4) Some of the shadow space is in buildings that are under construction or planned for construction.

5) Building out space for a corporate user is expensive. If a company thinks that they may need the space again, it may be worth sitting on it for a while rather than subleasing it, and then having to build out new space in the future (or leasing new space for more than they are getting from the sublet).

Right now, we believe that there is approximately 21 mm SF of shadow spadow space in the Manhattan market, including the World Trade Center development. Without the WTC, the total amount of sublease space is around 14 mm. Add that to the current available space on the market - 42 mm, and you get 63 mm with the WTC, and 56 mm without the WTC, or 17.4% and 15.5% availability rates respectively. Keep in mind, that a huge chunk of that space is sublease space which naturally trades at a large discount to direct space. Now you're seeing the real picture of what's going on!