REal Talk with Adam Perrotta-Wednesday

By Adam Perrotta, News Writer

--While Manhattan's Downtown and Midtown South office submarkets have recently been billed as havens for smaller tenants looking to avoid the sky high rents of Class A Midtown space, such firms may still be able to find affordable yet high quality digs there--at least if more owners follow the strategy of Sherwood Equities. The developer just ponied up $155 million to acquire the 307,000-square-foot Class B office at 370 Lexington Ave., and plans to renovate and market the building to tenants looking for smaller spaces. With average rents for Class B space well below Class A in Midtown, Sherwood is hoping to attract business service tenants such as law and accounting firms, a market Sherwood feels is under-served in the submarket.

Given that many such firms are feeling the ripple effects of the struggling economy, it would stand to reason that they would be looking for ways to cut down on costs. Dropping down a class--or a half a class--from the A level may be a good strategy; and therefore Class B space might be a good thing to own these days.