Comparison of tenant-effective rental rates (U.S. dollars/ square foot)

Locale 1992 1993
Downtown Los Angeles $11.82 $9.97

Chicago 17.20 13.18

Houston 16.66 14.60

Baltimore 17.41 14.93

Philadelphia 21.28 19.12

West Los Angeles 21.48 20.19

San Francisco 20.62 21.06

Atlanta 22.11 21.26

Boston 22.13 21.92

Downtown New York City 24.12 24.17

Washington, D.C. 24.74 26.90

Midtown New York City 29.71 30.25

Source: "1993 National Rental Survey," Julien J. Studley, New York City, January 1994.

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The annual survey taken by Julien J. Studley, a national commercial real estate firm, reveals a downward trend in the rental cost of office space in 8 of the 12 major markets it studies. From 1992 to 1993, tenants' rent for Class A full-floor space in new constructions (erected from 1989 onward) rose only in downtown and midtown Manhattan; San Francisco; and Washington, D.C. It fell in Atlanta; Baltimore; Boston; Chicago; Houston; downtown and west Los Angeles; and Philadelphia. (The survey was taken prior to the Los Angeles earthquake; postquake rates in the stricken area were not substantially different, says Studley.)

The table above compares 12 locales on the basis of annual square-foot "tenant-effective" rents for a 10-year lease -- essentially, the bottom-line cost to a tenant. The rate is calculated as total rental rate less the amortized dollar value of concessions proffered by anxious-to-rent landlords, such as allowances for tenant improvements and out-and-out free rent.

Tenants continue to have the upper hand in most markets, the survey concludes. But the tide may be changing. Because of a slackening of new commercial construction across the country, the supply of vacant office space is dwindling, and landlords may not continue to be so generous. Penny-pinching is already evident in Washington, D.C., where a sharp decrease in concessions has helped elevate that city's effective tenant rental rate to the second-highest nationwide, behind only midtown Manhattan.

A copy of the 11-page 1993 "National Rental Survey," which also compares total rents, net rents, operating expenses, taxes, and electricity costs, is available for $25 from Julien J. Studley (212-326-1039).

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