The Russians are coming!

Tatiana Tarassenko, a managing director at Studley, is representing the firm. Reached in her office, however, Ms. Tarassenko declined to comment for this story.

A CBRE team led by Howard Fiddle and Craig Reicher represents 452 Fifth Avenue's landlord, the Israeli investment firm IDB Group. CBRE execs couldn't reached.

Details of the transaction were vague at press time, including which floor VTB was in play to occupy. Several floors at the property, ranging from 14,000 to 16,000 square feet, are currently available. Recent rents in the 650,000-square-foot, 30-story tower, which overlooks Bryant Park, have stretched above $80 per square foot.

The transaction, if it gets done, would be the latest in a series of deals at 452 Fifth and at least the second tenant involved in the Russian investment industry.

In September New Century Holdings, a private equity and venture capital firm, took the building’s full 24th floor, a 16,500 square foot space. NCH, as the firm’s name is abbreviated, invests in companies and businesses in both Russia and countries that were formerly part of the Soviet Union.

NCH’s lease was for 15-years and rents reached above $80 per square foot. A CBRE group led by broker Ben Friedland, a specialist in high end deals, represented NCH in that lease.

Joe Cayre purchased 452 Fifth Avenue with investment partners for approximately $300 million, or a little over $450 per square foot, during the depths of the recession, in what now looks like a relative bargain considering the leasing activity the building has received in recent months and the high rents it has been netting.

The non-profit has subleased nearly 30,000 square feet for seven years from finance firm Liquidnet, at 498 Seventh Avenue, the Commercial Observer has learned.

The foundation dedicated to aggressive research towards a cure for Parkinsons—from which Mr. Fox himself suffers—is vacating digs at 90 Broad Street for the entire 18^th floor at 798 Seventh Avenue.

The move away from downtown, traditionally a hub for non-profits, was motivated by a desire to be in Midtown, closer to business partners, and to entertain in larger space, said brokers familiar with the deal.

The Garment Center building is 99 percent leased, with a diverse tenant roster that includes several divisions of advertising giant WPP, Massachusetts Mutual Life Insurance and fashion label Betsey Johnson.

Liquidnet, an institutional trading network, has two floors in the building, and opted to sublet one after not expanding as quickly as anticipated, said a source familiar with the transaction. They will pay for a complete build-out of the space for the Michael J. Fox Foundation, which plans to move in the first or second quarter of 2012.

J.P. Morgan Investment Management acquired a 49.9 percent stake in the building from a Canadian pension fund for $205 million in July. The transaction valued the 933,000-square-foot property, managed by George Comfort & Sons, at $439 per square foot.

A CB Richard Ellis team of Molly Concannon, Joseph Mangiacotti and Howard Fiddle represented the landlord, and asking rent was $42 per square foot. Brian Siegel of The Lawrence Group represented the tenant.

CB Richard Ellis is representing IDB Group subsidiaries Property and Building Corporation Limited, a holding company, and Koor Industries Limited, a holding company, which together own the building. The current tenant, HSBC Bank, which has occupied the space since 1999 (the building was constructed in 1984), plans to shrink its office space into the building's base.

Craig Reicher, vice chairman of CBRE New York Tri-State, called the office space his firm will market "A-plus," "high-quality" and "boutique." Both Mr. Reicher and Ehud Elizur, executive vice president of PBC-Koor USA, praised the view from the tower floors, which takes in Bryant Park, Rockefeller Center and the Brooklyn and Manhattan bridges. "If you're going to meet high-net-worth clients, you'd rather do it in a building like this and not in a Class B building without any view," Mr. Elizur said.

The building's owners have hired Studios Architecture, which has also done projects at 200 Fifth Avenue and 731 Lexington Avenue, to renovate the building. Changes will include an upgrade of the lobby, a set of new elevators and an installation of new electromechanical systems. The work, Mr. Elizur said, will begin in September and, if all goes according to plan, will end in March.

"It'll really transform the entrance to the building," Mr. Elizur said. "The lobby is nice, but it's from 1984."

Representing ownership will be, in addition to Mr. Reicher, CBRE vice chairman Howard Fiddle; first vice presidents James Ackerson, Sinclair Li and Zachary Freeman; and senior financial analyst Rima Shpolyansky.

walden@observer.com

According to a release issued Tuesday afternoon by CBRE, Xinhua has leased 18,600 square feet, the entire 44^th floor, which it will use as both offices and television studios. The deal brings the occupancy of 1540 Broadway up to 84 percent, which seems to bode well for the commercial market generally. Howard Fiddle, vice chairman of CBRE, who ranked among the all-star leasing team, described Xinhua's new home in glowing terms.

"The 44^th floor is a special floor," he told The Observer. "A big section of it is double height. It's one of the most dramatic pieces of office space in Manhattan."

Mr. Fiddle said he's excited to be leasing to Xinhua, which was represented in the deal by Jones Lang LaSalle, and which Mr. Fiddle said is a "very, very recognizable name" in China and around the world. He expects that the company, which will mark its territory with an antenna fastened to the building's roof, will use the space to broadcast content back to China, rather than to American television.

The building itself presented a minor obstacle to the deal. The 45^th floor, which isn't used as office space, houses the machine room. It's noisy, and Xinhua studios need silence.

"I know more about soundproofing than I ever thought I would," Mr. Fiddle said.

walden@observer.com

Sublease space—extra space that tenants like Lehman Brothers and The New York Sun put back on the market—isn’t just a subset of the larger office market. It impacts that overall market, and not in a pretty way.

“As you get a very high level of sublease space, it really begins to put downward pressure on the entire marketplace, because of what it does to pricing,” said Howard Fiddle, vice chairman for the tristate region at CB Richard Ellis.

That’s because distressed tenants bound by long-term leases are more desperate than landlords to get some rent, any rent, rather than shoulder the burden alone. The average Manhattan sublease asking rent, at $62.71 a square foot, is 11 percent less than the average direct asking rent of $70.23, according to CBRE. (And those are asking rents, mind you, which, thanks to the surge in supply, have become increasingly elastic.)

“At times, in real bad economies, sometimes [sublease space] can convert to direct space if a tenant goes out of business,” Mr. Fiddle added. “A lot of these hedge funds, not to name any names right now, are listed for sublease, but they’re teetering and in a few months could be gone.”

And so the sublease pile grows. And grows.

Between July and December of 2008, Manhattan’s sublease availability—sublease space that is either vacant or will be within 12 months—jumped from 7.2 million square feet to 11.2 million, or 28.3 percent of available office space in Manhattan’s 362 million-square-foot marketplace.

Most of that space, unfortunately, is coming from the three pillars of New York’s tenant base. Financial firms, which occupy 25 percent of the supply, coughed up 3.9 million square feet (40 percent of available sublease space). JPMorgan Chase’s acquisition of Bear Stearns alone added 600,000 square feet, and AIG’s troubles, Barclay’s acquisition of Lehman assets and the Bank of America/Merrill Lynch merger could add up to 4 million additional square feet. The advertising/media industry contributed 1.8 million square feet (19 percent); and law firms added 1.3 million square feet (10 percent).

MEANWHILE, CBRE reports that “the number of blocks of contiguous sublease space greater than 100,000 square feet in Manhattan has almost doubled since December of 2007, and the total square footage has increased by 109 percent.” That’s a trend, according to the brokerage, “that will likely increase as corporations continue to reduce their work force [by an estimated 86,000 office jobs through 2009].”

In December 2007, there were nine such blocks, totaling 1.5 million square feet. By December 2008, there were 16. (In 2002, after the dot-com bust, there were 26 blocks of 100,000-plus contiguous feet.)

Thank God 2008 is over. But what of the economy in ’09? And in ’10? Dare we hope?

“In 2010, growth will be lackluster at best,” said Sam Chandan, formerly of REIS and now president and chief economist at consultancy Real Estate Economics, adding that the national economy’s contraction should slow at the end of this year. New York’s economic recovery will lag the rest of the nation’s, he said, thanks to its unique exposure to the finance industry.

The dapper Dr. Chandan (barbershop-striped tie, monogrammed French-cuffed shirt) was speaking to six tables of real estate executives during a Monday afternoon National Realty Club luncheon at the Williams Club. The striped curtains behind him opened onto the drab, rust-colored bricks of the neighboring buildings.

Though his near-term prognostications are dire, Dr. Chandan warned against what he calls “headline risk,” which translates roughly into the media overstating the problem and potentially contributing to a “negative price bubble,” in which commercial property values actually fall below their fundamentals.

After all, he said, the New York City market has one distinct advantage: “We haven’t seen a lot of development activity over the last four or five years.”

CB Richard Ellis agrees, pointing out that only four new big office buildings are scheduled for completion over the next four years: “200 West Street (1.9 msf), 11 Times Square (1.1 msf); 250 West 55th Street (800,000 sf), and 510 Madison Avenue (330,000 sf).”

And while the market continues to deteriorate, as of Dec. 1, it had still yet to reach the post-dot-com levels of 2003, when the sublease space totaled 14.8 million square feet.

EVEN SO, the nagging question remains: Who will pick up the slack of Manhattan’s three driving office tenants?

“There is a real conundrum,” said Robert Freedman, executive chairman of Williams Real Estate, a First Service Company. “It’s not like there are pat, simplistic answers. This is so fundamental that a lot of people just say we’ll work through it, we’ve done it before, we don’t exactly know how. … I am more and more convinced it is through what will be a new ... sector of the economy, which is sustainability.”

Others, like Mr. Fiddle of CBRE, believe that the tenant base will remain the same, if in a slightly altered form: “We don’t necessarily think the [financial services] industry will go away. Certainly, companies will go away. But if we fast-forward a few years, a lot of new firms will form.”

Mr. Fiddle pointed out that while financial firms are the biggest contributors to the sublease pool, they’re also sopping up some sublease space. In recent months, financial firms have signed 44 leases for sublease space, in contrast to the second biggest taker, law firms, which have signed 20. But, tellingly, the 44 deals comprised only 9,850 square feet, compared to the law firms’ 24,300 square feet. In other words, the new financial firms appear to be small.

Yet, Cushman & Wakefield executive vice president Dale Schlather said that those smaller firms will certainly grow with time.

“I think all these guys getting laid off, they’re plenty smart and they shouldn’t really be laid off, but the world is what is it,” he said. “They’re not going to give up, and with the Goldman Sachses and Morgan Stanleys turning into banks, I think you’ll see a lot more smaller boutique investment advisory companies that will be fee-driven, not equity-driven. They’ll be smaller firms, and then [they] will get bigger.”

drubinstein@observer.com