Manhattan Owners Retaking Control of CRE Market

Boston Properties is preparing to restart construction on the Manhattan, N.Y., office tower it put on hold in 2008 after trouble with an anchor tenant that threatened to tank the project. The real estate developer plans to start work on the one-million-square-foot 250 West 55th Street building at year’s end--because a new tenant, the law firm Morrison Foerster, has signed a letter of intent to rent the space. The building will be available for the law firm and other tenants by the end of 2013, with occupancy expected in mid-2014.

Industry experts see the plan to build the skyscraper as the latest sign that after three years of a tenant-dominated commercial real estate market, owners are retaking control. “When we decided to suspend construction, it was in the context of being very unsure of what was happening in the financial world and when leasing velocity would pick back up,” said Douglas T. Linde, president and chief financial officer, Boston Properties.

Other signs of a shift include reduced concessions for tenants and higher rents. But experts are warning that some of the leasing activity is from companies that are relocating or even consolidating after layoffs. They are warning that tenants shouldn’t fear a spike in rents in the coming months, but they shouldn’t expect to see rents fall if they wait before signing a lease.