Brokerage Outlook: New York


• New York City Retail

• Bronx Industrial

• Upstate New York Industrial

• New York City Multifamily

• Upstate New York Multifamily

• New York City Office

New York City Retail Emery Submitted by Christine Emery, senior managing director of the New York City office of The Lansco Corporation. Posted 09/18/07. Click here for more information What area is your expertise? • Our area of expertise is the New York metropolitan area. What trends do you see presently in retail development in your area? • The luxury sector continues to be very strong in Manhattan. Major companies like PPR and Giorgio Armani are securing Fifth Avenue locations to house both retail and corporate operations.  What type of retail product is doing well in your area? • Generally, all retail products are experiencing consist and strong sales. The stand out product would be in accessories — handbags, shoes and jewelry. What retailers are new to your area? • The newest arrival to New York City retail is JC Penney who has taken over 150,000 square feet at the Manhattan Mall at Herald Square and 34th Street. Who are the active retail developers in your area? • Most developers in the metropolitan area have a retail component to their properties. Leviev Boymelgreen have been active in the downtown Wall Street market and Elad Properties, the group that recently purchased the Plaza Hotel, is creating high end boutiques on the ground floor. Please name one or two significant retail developments in your area. What impact will these projects have on the market? • Macklowe Properties has recently completed the construction of a commercial building at the corner of Houston Street and Broadway. The greater part of the building is now occupied by Reebok. At 767 Fifth Avenue, The GM Building Macklowe reconfigured the plaza area and brought Apple to the location. Where is the majority of development taking place? Why is this area doing well? • There is no single area of the metropolitan area that is not experiencing development. What area do you expect to be the next big retail development market? Why? • Long Island City has been slow to change but with the arrival of several Rockrose residential towers there is new life in the area that is attracting the retail service sector; dry cleaners, supermarkets and wine shops. What major leases have been closed recently? • A Lansco project at 23 Wall and 15 Broad Street has recently become the chosen location for upscale luxury brands. A lease was signed with Hermes in 2006 and has resulted in inquiries from Cartier, Bulgari, Burberry and Louis Vuitton. Please describe the retail leasing activity in your area. • The retail vacancy rate is low but there is always opportunity. Many smaller stores are considering side street locations that offer proximity to major thoroughfares and lower rents. Would you like to make any additional observations about the retail market in your area? • The metropolitan area continues to attract young families. There is a constant demand for good, moderately priced children’s clothes from toddler to age 16 or 17.

Bronx Industrial Submitted by Clark Goldberg, broker with the Brooklyn, New York-based Kalmon Dolgin Affiliates. He is based in the Bronx office. Posted 02-15-07. What area is your expertise? • Industrial/warehouse space in the Bronx. What trends do you see presently in industrial development in your area? • With more than a $1 billion investment in Bronx housing construction in the last few years alone, we have seen a lot of residential and commercial conversion. The impact has made top-notch Bronx industrial space a challenge to find, but Kalmon Dolgin Affiliates specializes in finding these types of industrial spaces, as there is still a tremendous industrial component to this borough. What type of industrial product is doing well in your area? • All aspects of industrial, warehousing and distribution are handled in the Bronx. Though at one time the borough had a less-than-savory reputation, the vast majority of businesses now understand that the Bronx is one of, if not the most, convenient areas of New York with access to all highways and bridges. Businesses such as recycling take advantage of the required M3 zoning and, on the opposite spectrum, the Bronx has become the premier food capital of New York with the Hunts Point Cooperative Food Market and the Fulton Fish Market as its major draws. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? • Hunts Point and Port Morris Industrial Parks have recently undergone significant expansion. With the arrival of the Fulton Fish Market in the Hunts Point Food Cooperative, Hunts Point has become one of the tri-state area’s premier food distribution centers, as well as an extended transportation system. Expansion in this area is expected in the near future with the development of a site for Baldor’s Specialty Foods from another section of the industrial park. What area do you expect to be the next big industrial development market? Why? • All of the industrial areas will remain strong as more and more space is occupied. With the scarcity of land and the pressure to convert this land to other, more valuable uses such as commercial and residential, pressure will be increasingly strong to absorb land zoned for manufacturing uses. New York has a vested interest in keeping as much manufacturing land and building as possible from being co-opted. Please describe the industrial leasing activity in your area. • Kalmon Dolgin Affiliates-Bronx has experienced incredibly strong leasing activity. We find that people still prefer to buy, but there is enough clientele to take advantage of the leasing availabilities that are out there. We don’t see anything sit longer than 2 to 4 months, and often faster if it’s a good deal. Goldberg represented both the buyer and the seller of this single story warehouse, located at 400 Baretto Street in the Bronx, in a $2.3 million transaction. Please describe the industrial sales activity in your area. • In our Bronx office, single-story warehouse sales are harder than ever to find. Our firm specializes in this niche, and warehouses can range from 5,000 to 20,000 square feet. In terms of price, these types of properties run on average into the millions, based on location, size and features such as ceiling heights. There are still unique and exciting industrial properties that come on the market, selling almost immediately. Please give a measure of industrial vacancy rates. Please give a measure of available sublease space. • Vacancy rates are very low, thanks to economic development, government programs and overall betterment in New York City. We expect this to continue into 2007 and beyond. What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year? • The impact current interest rates have on the industrial market is the same as they have on every facet of the real estate market — they bring prices up. Nonetheless, the market’s strength will continue as economic development progresses in the Bronx. What industries do you expect to expand in the next year to absorb a great deal of industrial space? What areas will be affected? • Kalmon Dolgin Affiliates has served a vast number of clients seeking space in the residential development industry in the last several years. Manufacturing that has to do with residential development and any related industry such as lumber, metal, construction or roofing — any industry involved in putting a roof over someone’s head. Would you like to make any additional observations about the industrial market in your area? • Citywide tax incentive programs in New York Empowerment Zones throughout the boroughs were created to revitalize economic development and initiatives. Our brokers are familiar with the wide array of tax incentives, power rebate programs and low- or no-interest loans available through New York City and state programs. Kalmon Dolgin Affiliates specializes in helping the client take advantage of the wide array of government programs available in the boroughs we serve.

Upstate New York Industrial Carr Submitted by Howard Carr, president with the Albany, New York, office of The Howard Group/TCN Worldwide. Posted 6-1-06. What area is your expertise? • Upstate New York What trends do you see presently in industrial development in your area? • The lack of modern facilities and the need for more zoned land that is well located in terms of transportation and an employment base, with public water and sewer. What type of industrial product is doing well in your area? • The most modern of facilities with high cubic volume for distribution and warehousing are in heavy demand. Flex facilities that can provide ended services for the high-tech businesses are just now coming into the market. Who are the active industrial developers in your area? Buffalo - Ciminelli Development Company Rochester - Flaum Management Company, Crista Construction Albany - Columbia Development Companies, Galesi Group Please name one or two significant industrial developments in your area. What impact will these projects have on the market? • Rochester - the redevelopment of the former Kodak Elmgrove facility, aka Rochester Tech Park, and the redevelopment of the former Seneca Army Depot • Syracuse continues to redevelop the former Carrier and Chrysler facilities, with no significant new developments. • Buffalo has substantial standing inventory that there is no major development occurring. • Albany has a severe lack of modern available space and a lack of zoned land available to develop on. Current projects by Galesi in the Rotterdam, Green Island and Guilderland Industrial Parks make up the major portion of the new development in the area. However, the planned Luther Forest Technology Park in Malta (Saratoga County) is rumored to be ready to make a major announcement. This park is "shovel ready" for up to 2 million square feet for a chip fabrication facility. Where is the majority of development taking place? Why is this area doing well? • In the Capital Region, the major portion of development is expected to occur in Saratoga County as a result of there being a site that is shovel ready and has all the needed amenities for the level of development expected. • Areas around the Fishkill area of Orange County will also continue to see additional development due to the proximity of the IBM facilities and other high-tech companies. What area do you expect to be the next big industrial development market? Why? • The greater Capital Region is expected to expand dramatically due to the impending announcement of a major high-tech company making Malta in Saratoga County the newest announced location for a chip fabrication facility. Please describe the industrial leasing activity in your area. • Leasing remains strong throughout most of the area with minor rent concessions. The major change in the market is the new interest by many users from outside the state who currently have no presence in the market. Please describe the industrial sales activity in your area. • Sale activity is slow, but there have not been any major blocks of space sold in the Upstate New York market during the past 2 to 3 years. Some facilities have recently been put on the market, but we await market movement to see if these price points are sustainable. Please give a measure of industrial vacancy rates. Please give a measure of available sublease space. • Most of the markets of Upstate New York have minimal amounts of sublease space. The vacancy within the markets is still running between 5 and 10 percent based on specific markets. (Buffalo is higher, and Albany is very low.) However, when compared to the overall standing inventory, and the level of obsolescence in some of the facilities, the market remains stable with upward movement evident in certain areas. What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in 2006? • I do not see any significant change that can be directly attributed to increased interest rates. The potential for increased rates will not be a damper on the market, because the markets that are most likely to see substantial growth will see them in the high-tech arenas, and that industry, due to its cyclical nature, will not be stymied by interest rates. What industries do you expect to expand in 2006 to absorb a great deal of industrial space? What areas will be affected? • All forms of high-tech industries in most of the upstate markets. Manufacturing will still absorb much of the market in the central and western sections of the state, but the area from Albany through the lower Hudson Valley will continue to be focused around the high-tech initiatives. Would you like to make any additional observations about the industrial market in your area? • The local municipal officials need to be cognizant of the need to find locations that are adequately served by transportation and public utilities and are ready for industrial development. This need continues to grow and will into the future as we replace the aging infrastructure of the multi-level buildings from past decades.

New York City Multifamily Goldschmidt Submitted by Steven O. Goldschmidt, managing director of New York City-based Warburg Marketing Group. Posted 02-01-07. What area is your expertise? • The New York City market (Manhattan, Brooklyn and Queens). What trends do you see presently in multifamily development in your area? • The continuing high demand for ownership of condominiums, cooperatives and townhouses, and the continuing expansion of that movement to new areas and neighborhoods of New York City and its boroughs. There has been a surge in new development, both construction of new buildings and rehabilitation of existing structures, throughout the New York metropolitan area. This has also been accompanied by an increasing number of conversions of existing rental stock to individual condominium ownership. Demand for housing continues to outpace the available and future supply in all market sectors. Who are the active multifamily developers in your area? • The Related Companies, Zeckendorf Co. and Extell Development are three prominent and active multifamily developers. However, there are other smaller active developers focusing on developments in new neighborhoods, such as Tahl Propp Equities and KG Properties,which are both important owners and developers in Harlem and Upper Manhattan. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? • The Related Company recently completed the construction of the Time Warner Center at Columbus Circle, a large complex with high-end condominium units, a retail mall, hotel space and Jazz at Lincoln Center. Related is also developing many other projects such as One Carnegie Hill, the Veneto, and others. Zeckendorf is in the final stages of developing 15 Central Park West, one of the most successful new developments in recent years with record-breaking prices and sales. Extell recently completed the development of the Orion at 42nd Street near the Hudson River, and the company is developing other luxury condominium properties around New York City. On a smaller scale — but no less important in terms of impact on its neighborhood — KG Properties’ new development, the Ivy Condominium, is the first luxury, 24-hour-doorman building constructed in East Harlem. Forty percent of the units have been sold at record prices in just 3 months, and new and larger luxury developments are now being planned within several blocks of this new property. Where is the majority of development taking place? Why is this area doing well? • There is no one area where the majority of development is taking place. There is significant development in diverse areas of New York City — Chelsea and the ‘Hi-Line’ area of the West Side, all parts of Harlem, the Upper East Side, Midtown, the Financial District and Lower East Side. What area do you expect to be the next big development market? Why? • As sites in Manhattan become more and more difficult to find and develop, there will be an inevitable movement to develop in older areas of Brooklyn and in former industrial areas of Queens. What areas are doing well in terms of apartment leasing? Which areas are struggling with leasing? • All market sectors in Manhattan are doing well. There is particular interest in Upper Manhattan, Brooklyn and Queens in terms of more affordable rental housing. What impact do current interest rates have on the apartment and condo markets? What predictions do you have for interest rates and their effect on the multifamily market in the next year? • It is generally acknowledged that the favorable — and at times record-low — mortgage interest rates have had a significant impact on the apartment and condo market, spawning a new influx of young buyers into the marketplace by making homeownership as affordable (if not more affordable) than renting. What is the status of job growth/(un)employment rates and what bearing will it have on the multifamily market? • New York continues to have very favorable and low unemployment. More significantly, New York’s job market continues to show strength in non-manufacturing ‘white collar’ jobs that are higher paying, making apartments and condominiums more attractive. As long as this trend continues, it should have a parallel effect on the apartment and condo market.

Upstate New York Multifamily Carr Submitted by Howard Carr, president with the Albany, New York, office of The Howard Group/TCN Worldwide. Posted 6-1-06. What area is your expertise? • My expertise is based in the Upstate New York market, and our company is heavily involved in the development, leasing and management of multifamily properties and industrial properties throughout the region. What trends do you see presently in multifamily development in your area? • The market is currently experiencing the elements of new development in terms of rental product. While rents have been maintained within the market, some of the older, less amenity-intensive projects are not realizing any gains. The newer products are achieving their rent schedules, in general, with those that feature secure car storage, faring better than others without it. • The condo market continues to ramp up in terms of alternatives. Many products are just now coming to market, but the allure of the no-maintenance lifestyle is appealing to a larger section of the market. The empty nester market is showing very high levels of interest in terms of downsizing the housing situation and liquidating equity to fund alternatives for this changing lifestyle. Who are the active multifamily developers in your area? • The largest multifamily developers are Dawn Homes, Albany Partners, Marvin Chudnoff, and Long and Raymond. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? • The two most recently completed developments in the area are Hudson Preserve in the Town of Colonie in Albany County and Forest Point in East Greenbush, Rensselaer County. • Hudson Preserve, developed by a group led by Marvin Chudnoff, is a higher-end product featuring in-unit washer/dryer hook-ups, 9-foot ceilings and a substantial number of separated garages for its tenants. The Adirondack architecture theme rings throughout all the amenities, including a well-designed clubhouse. Situated on 50+ acres, the site will only see 224 units, with an expected completion date of summer 2007. • Forest Point is similar in nature to the Hudson Preserve project in that it features many of the same amenities and provides for unattached parking facilities. Where is the majority of development taking place? Why is this area doing well? • The major portion of the development is taking place in the greater Capital Region surrounding Albany. This region, currently experiencing the state's lowest unemployment rate, is quickly becoming home to the burgeoning nanotech industry. With SEMATECH North, situated at the western edge of the University at Albany campus, and in a joint venture including Rensselaer Polytechnic Institute along with IBM, Intel, Motorola and Tokyo Electron, the region is poised for substantial job growth and expansion as these high-tech companies expand their workforces in the region. What area do you expect to be the next big development market? Why? • The areas in Upstate New York that are willing to accommodate those industries that are making a charge at retooling their economies will fair well into the future. They include Rochester, Syracuse, Albany and Buffalo, along with the Hudson Valley. These communities have taken it upon themselves to embrace the initiatives of the current administration and to expand into businesses that are fundamental to their current economies. Rochester, for example, with its background in photography and optics, is becoming a powerhouse in terms of photographic and image technologies. The Hudson Valley continues its expansion through its efforts with IBM and the first 300-millimeter wafer facility in the United States. • The big development area will be the Upstate area between New York City and Albany as the nanoscience and nanotechnology initiatives gain more strength. The areas of western New York will also continue to show signs of growth, as their economies move into the high-tech arena and the market realizes the benefits of utilizing a well-trained and productive work force. What areas are doing well in terms of apartment leasing? Which areas are struggling with leasing? • The Buffalo market continues on its current path with no major concessions but no major gains, either. Rochester has seen some gain in terms of disappearance of concessions with very minor gains in rents. Syracuse continues to rebound from its previous doldrums and is poised to sustain some impressive growth in rents and occupancies. The Capital Region market continues to fair well, without any significant rent concessions, and the Hudson Valley markets continue to show rent increases, primarily from the growing influence of the New York City market. Please give a measure of apartment vacancy rates. • Vacancies in all the upstate markets continue to remain steady in the 5 to 6 percent range, on a marketwide basis, with isolated instances of very low vacancy in certain property types. Please give a measure of condo sales activity in the area. • The condo markets in the Buffalo, Rochester, Syracuse and Albany areas are just getting moving in terms of development of the product line. The lack of previous condo development has led the market to develop product that is geared to both first home buyers and last home buyers. The market for conversion at this point is minimal, at best, but continued job growth and burgeoning greenfield development costs will place pressure on the standing stock and make it economically feasible to seek conversion opportunities. What impact do current interest rates have on the apartment and condo markets? What predictions do you have for interest rates and their effect on the multifamily market in 2006? • The primary impact of increasing interest rates on the apartment market has always been good for the ownership side, as the increasing rates continue to reduce affordability levels for many potential home buyers. This in turn leads to increased demand for the product and escalating rents, as demand moves the market. • The condo market, on the other side of the coin, could potentially be affected. While much of the market demand will result from a lifestyle change for the empty nester baby boomers, the first home buyers will still face affordability hurdles. The higher priced product should fare well, since the baby boomers who are selling their 2,500-square-foot colonials that are 20 to 30 years old in suburbia, will be in a position to free up the equity they have in their primary residences and invest into condo product in both the local markets and potentially in the second home markets. What is the status of job growth/(un)employment rates and what bearing will it have on the multifamily market? • Job growth remains a critical element in any real estate market, and Upstate New York is not immune to any of the vagaries of that fact. However, since Upstate New York has long been a bastion of higher education, I can see positive job growth resulting from the affordability of the markets in terms of overall living costs and through the benefits of the quality of life these locations offer. As the world market adjusts to the concept that communication is going to influence our living and working choices, the multifamily market will fare into the future, as the real estate community provides the housing alternatives that satisfy the workforce goals. Would you like to make any additional observations about the multifamily market in your area? • The market will continue to grow as the demand continues to support the economics of the development side, be it ground-up construction or conversion. The primary element of concern rests with the restraints placed on the development community through the local municipal approval processes. If the Upstate New York market is going to grow to support the initiatives already providing the future of the region, then the elected officials need to be responsive to the needs of the region, and that of their current residents, in order to maintain an effective and orderly route to the future.

New York City Office Lindner Submitted by Peter G Lindner, associate with the New York City office of NAI DG Hart. Posted 12-12-05. What area is your expertise? • New York City Office Market What trends do you see presently in office development in your area? • The trend of "green," or environmentally friendly, development is one that has gained momentum through 2005 and looks to be the next large-scale focus in New York City. The Durst Organization, pioneers of green development in New York City with the development of 4 Times Square in 1999 and 1 Bryant Park (Bank of America Tower) due in 2009 continue to champion the fuel-efficient, environmentally friendly approach to building with its latest residential development, the Helena at 601 West 57th Street. The Hearst Corporation's 856,000-square-foot Class A headquarters at 959 Eighth Avenue will utilize green technology and is set for delivery during 2006. Also of note, Goldman Sachs recently broke ground on its 43-story global headquarters on 2 acres in Battery Park City. Goldman is committed to build utilizing green technology and its plans have already been certified with the Leadership in Energy and Environmental Design (LEED) Gold rating, the highest for a building of its size. We have also seen continued interest in the outer boroughs of New York City, with proven development organizations Two Trees and the Rockefeller Development Corporation focusing on large-scale projects in Brooklyn and Queens respectively. Who are the active office developers in your area? • The office developer in New York City attracting the most attention in 2005 and into 2006 has to be Larry Silverstein and Silverstein Properties. From his legal battles with insurance firms to the highly anticipated delivery of 7 World Trade Center and his friction with the mayor over the Freedom Tower, Larry Silverstein has been extremely active in 2005. The 1.7 million-square-foot 7 World Trade Center is currently asking $50 per square foot, rivaling Midtown Manhattan. American Express has already signed as the first tenant. • Other active developers include the Durst Organization, which has begun construction on the 2.1 million-square-foot Bank of America Tower (due for delivery in 2009) and the Rockefeller Group Development Corporation who has begun developing Flushing Commons, a 5-acre, $500 million mixed-use development in Flushing, Queens. Please name one or two significant office developments in your area. What impact will these projects have on the market? • Two buildings that are currently under construction and set for delivery over the next 2 years are The New York Times Building at 620 Eighth Avenue and the Hearst Corporation Headquarters up the block at 959 Eighth Avenue. The New York Times building, a 1.6 million-square-foot Class A tower will be delivered during the second quarter of 2007 and is being developed by the Forest City Ratner Companies. The Hearst Corporation's 856,000-square-foot Class A tower will be another green building to "sprout" up in midtown. The New York Times building will introduce 700,000 square feet of Class A space to the market in early 2007, which will undoubtedly cause Midtown's top tenants to consider Eighth Avenue a viable office location as vacancy continues to dwindle. Where is the majority of development taking place? Why is this area doing well? • Midtown Manhattan's far west side, on Eighth and Ninth Avenues from 33rd Street to 57th Street has more than 6.9 million square feet of development projects which have either broken ground already or are in the planning phase. The New York Times and Hearst Corporation headquarter buildings total 2.46 million square feet at 620 and 959 Eighth Avenue. Additionally, MB Real Estate is developing Times Square Plaza, an 850,000-square-foot building on Eighth Avenue and 42nd Street set for delivery in 2009. Also of note, Brookfield Properties has the 2.5 million-square-foot 401 W. 31st Street at Ninth Avenue in the proposal stages. As the more popular submarkets in Midtown become developed and re-developed, developers and builders are looking west to Eighth and Ninth Avenues along the E Train route for opportunities that provide a solid alternative to the Grand Central Station and Plaza District submarkets. What area do you expect to be the next big development market? Why? • We have seen increased interest from development companies in the outer boroughs of New York City, especially Long Island City in Brooklyn and Queens. With investment sales volume surpassing $18 billion in 2005, developers are being forced to bid on projects they may view as overpriced, or look to the next markets and speculate where the next development and office demand is going to be. Reckson Associates moved into the Long Island City market with its $470 million purchase of the Citigroup Tower at 1 Court Square. Rockefeller Development Corporation has begun large-scale projects in Queens, and Two Trees Development continues to scour the Brooklyn markets for development projects. What areas are doing well in terms of office leasing? Which areas are struggling with office leasing? • The Plaza District, the Avenues in Midtown Manhattan from Park Avenue to 6th Avenue and 44th Street to 59th Street have seen high price-per-square-foot office space in Manhattan's top Class A office buildings disappear from the market. High-end legal and financial services firms continue to battle over who will lease more quality space. The lack of Class A sublease space in Midtown has forced many legal tenants to renew and expand in their current spaces, rather than go into the market, driving the supply of available space down while demand remains high. Law firms Fried Frank Shriver Harris & Jacobson, DLA Piper Rudnick Gray Carey, and King & Spalding all renewed and expanded their current leases to more than 200,000 square feet or more during 2005. Please give a measure of office vacancy rates. Please give a measure of available sublease space. • Showing the true strength of the New York City Office Market in 2005, vacancy rates continued to drop to a 3-year low at 7 percent. Even as rents dipped slightly during the third quarter of 2005 to $47.97, they quickly recovered and are hovering near $48.27 during the middle of the fourth quarter. Increased demand from financial services and especially law firms fueled the continual drop in vacancy rates and look to continue to do so during the first quarter of 2006. In Midtown Manhattan, sublease space reached a 3-year low at 3.47 million square feet, a mere 1.3 percent of the overall vacancy rates. Currently, there are only four sublease spaces greater than 100,000 square feet available in Midtown, pushing the demand for these blocks to far outpace the supply in 2006. What impact do current interest rates have on the office market? What predictions do you have for interest rates and their effect on the office market in 2006? • The investment sales market has seen its overall volume grow to $18 billion in 2005 and which has seen the ferocity at which investors clamor for deals rise. Investment sales will be most affected by the Federal Reserve Bank's program of raising interest rates through 2005. As money becomes more expensive to borrow and the spread between real estate returns and traditional equity returns are driven closer together by the swarms of investors that 2005 experienced, we expect non-traditional real estate investors to begin to back away from real estate deals in New York City. What is the status of job growth/(un)employment rates and what bearing will it have on the office market? • New York State's unemployment rate decreased from 5.3 percent in September 2005 to 4.9 percent in October 2005, while the nation's unemployment rate decreased from 5.1 percent to 5 percent. New York City's unemployment rate also decreased, from 6.1 percent to 5.7 percent, dropping the city's and state's unemployment rates to their lowest October levels since 2000. A healthy economy is always good for New York City's office markets and with dropping unemployment rates continuing from 2004 through 2005, we can expect to see tenants across a multitude of sectors and industries grow in kind. Is there any type of office tenant absorbing a majority of space? What industries do you expect to expand in 2006 to absorb a great deal of office space? What areas will be affected? • We expect law firms -- which traditionally gain market share by acquiring lawyers and merging firms -- to fuel the Class A office market through 2006. Private equity firms and investment banks are looking to 2006 to be a strong deal-making year, and their expansion in and moving between Manhattan's top Class A buildings reinforces that view. Bank of America and Citigroup led the financial service firms leasing space in 2005 and look to continue to grow in 2006. JP Morgan Chase experienced every aspect of commercial real estate transactions in 2005, selling its building at 522 Fifth Avenue for nine-figure returns, subleasing 200,000 square feet of space at 1211 Avenue of the Americas to law firm Ropes & Gray and growing back into portions of its own sublease space at 245 Park Avenue. Would you like to make any additional observations about the office market in your area? • 2005 was a banner year for New York City's office market. Law firms continued to fuel the acquisition side of the market while Financial Services firms, not to be outdone by their legal counterparts saw Citigroup, Bank of America and Morgan Stanley all lease 200,000 square feet (+) blocks of space throughout Midtown and Lower Manhattan. All indicators point to early 2006 to be a continuation of this market as continually dropping vacancy rates indicate a steady consumption of small, mid-size and large blocks of space throughout Manhattan. As like-use sublease space becomes less readily available, we can expect to see more firms opt to renew and expand their current leases in Manhattan's top buildings.