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THE ATTENTION HEAPED UPON Syska Hennessy in August when it signed a lease for 65,000 square feet in the heart of Times Square at 1515 Broadway took Robert Dusconi by surprise.
"Deciding to make a long-term commitment like this was important for us,'' says the engineering firm's chief financial officer. "But I didn't realize how important it was for so many others."
The ability of a medium-size deal to draw such attention says a lot about the Manhattan real estate market, which is suffering through its worst deal drought in years. And it says even more about the troubled Times Square submarket.
After two decades of explosive growth--with 23 skyscrapers going up since 1998, and a new tourist-friendly image taking shape--the area entered the recession with the second-highest average rents in the city, according to CoStar Group Inc. Now the owners of many buildings there are struggling to compete as rents sink and vacancies soar in more traditional midtown hot spots, including Park Avenue.
"We don't have anybody who's saying they want to be in Times Square right now, big company or small," says Marisa Manley, president of Commercial Tenant Real Estate Representation Ltd. "Right now, all the action and the interest are to the east, in the traditional midtown office neighborhoods."
Signs of Times Square's problems abound. The New York Times Co.'s 767,000-square-foot former head-quarters on West 43rd Street sits vacant; the old Bertelsmann property at 1540 Broadway was sold in March at a fire-sale price; and 11 Times Square, a 1.1 million-square-foot property due to be completed early next year, has yet to land a single tenant.
Meanwhile, Syska's new lease has been overshadowed by the departure of public relations firm Edelman, which left behind 100,000 square feet at 1500 Broadway to take up residence downtown in Hudson Square. Asking rents there average around $43 per square foot, versus $57.81 in Times Square, CB Richard Ellis reports.