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DURING THE THIRD quarter of 1999,
leasing activity in midtown south was
down 23% from a year earlier, and the
vacancy rate barely budged. But it wasn't
because the stretch of Manhattan
between 32nd and Houston streets was
not in demand.
On the contrary, an invasion of Internet and telecom firms in the past two years has sucked up virtually every patch of empty floor space. Since Jan. 1, such companies have leased almost 1 million square feet - nearly half of all the leasing in the district this year - and helped drive up rents 12%.
The breakneck growth of Silicon Alley has fueled a quest for space that has taken new media firms into parts of the city most bankers and brokers wouldn't dream of entering. The willingness to go almost anywhere for the promise of cheaper digs has sparked an unprecedented revival in down-and-out districts long forsaken by the commercial elite.
It started in 1995 in SoHo and in the financial district, which had a much higher commercial vacancy rate than the city's midtown office district. New media start-ups swarmed into buildings abandoned by brokerages that had gone bust or slashed staff to bare-bones levels.
Later, companies began to march north, taking over nondescript commercial districts and the gritty neighborhoods that were once home to the city's manufacturing industries. In areas like TriBeCa and the garment district, dotcoms have pushed out old manufacturing companies and spurred landlords to make costly and previously unthinkable improvements.
So rapidly are these companies eating up space that buildings and neighborhoods once considered marginal have become chic.
The Flatiron district and the newly trendy Hudson Square/TriBeCa area, which six years ago were rife with empty buildings, are...