Sizable Manhattan Office Lease May Indicate Impending Uptick

The New York City office market has taken its hits with the tanking of the economy, but accounting firm Marcum & Kliegman L.L.P.’s new lease agreement for nearly 67,200 square feet at 750 Third Ave., the largest tenant relocation lease in Midtown Manhattan this year, is sparking hope that the worst will be over sooner rather than later. Marcum & Kliegman will move from its current home down the block at 655 Third Avenue to the 11th and 12th floors of the 857,400-square-foot Class A building at 750 Third Avenue (pictured), which has been owned by SL Green Realty Corp. since 2004 when the company acquired it for $255 million. Originally developed in 1958, the 34-story structure is also referred to as Grand Central Square and is physically linked to SL Green’s office property at 486 Lexington Avenue. Marcum & Kliegman’s neighbors at 750 Third Avenue will include the likes of Fairchild Publications and former owner TIAA-CREF. SL Green relied on internal representation in the transaction, while Newmark Knight Frank stood in for Marcum & Kliegman. Financial terms of the 10-year lease deal have not been disclosed; however, SL Green’s website still lists 11th and 12th floor space at a rate of $55 per square-foot. A date for Marcum & Kliegman’s relocation to its new digs has not been announced, but SL Green is feverishly working away to complete the turnkey build-out for the firm, whose new commitment has left 750 Third Avenue 98.5 percent leased. The high occupancy level at 750 Third Avenue is hardly reflective of the current state of the New York City office market. First quarter 2009 numbers were grim, to say the least. Manhattan’s overall vacancy rate jumped from 8 percent in the fourth quarter of 2008 to 9.6 percent, according to a report by real estate services firm Cushman & Wakefield Inc. Two million square feet of sublet space hit the market, and the average rental rate for Class A space plummeted at an unprecedented quarter-over-quarter rate for Manhattan, going from $87.45 per square-foot to $81.55. And the forecast was for more of the same for the remainder of the year. However, now halfway through the second quarter, SL Green is a bit more optimistic about the future. “Certainly in the past 60 days we’ve seen a marked increase in tenants coming through for space tours, broker inquiries, proposal exchanges, and a lot more negotiations are ongoing,” Steven Durels, SL Green executive vice president & director of leasing and real property, told CPN. “We’re at a point where the major correction has worked its way into the market. There won’t be the wholesale reduction seen in rents over the past four months; any further softening will be on a case-by-case basis.”