'And a wonderful view of Manhattan'.

Selling tenants on the outer boroughs

When Insignia/ESG managing member Jeffrey Bernstein works with a company forced out of Manhattan by escalating rents, he keeps one idea in the back of his mind.

"Many tenants want to stay in New York City. You operate under that assumption,"

From there, he determines the, character of the displaced company, where its employees live, and how much rent it is willing to pay. Bernstein, who manages several buildings in Long Island City, is frequently able to convince a company to move to Queens because of its cheaper rents, loft-style office space and comparatively cheaper rents. For Internet and other creative companies with younger employees, its close proximity to Manhattan is preferable to a suburban market like Fairfield County.

"If you're priced out of midtown, where are you going to go? Long Island City is seven minutes away from Grand Central Station on the 7 train," he said.

Bernstein is among those grappling with the difficulty of convincing companies, fed up with Manhattan's high-rent neighborhoods, to relocate to the city's outer boroughs instead of moving out of state.

Ironically, the problem stems from a positive trend: demand for space in prime Manhattan neighborhoods has soared in recent years, causing rents to skyrocket.

Rents charged for Class A office space in Midtown Manhattan averaged $60.26 per square foot in 1999, an increase of 9 percent over 1998 and 16.8 percent over 1997. Although rents in Downtown Manhattan are lower, comparatively speaking, they are still too high for some companies. In 1999 average rents climbed just 2.8 percent to an average of $41.34 per square foot. In recent years, cities like Jersey City, N.J., and Stamford, Conn., have successfully convinced companies to relocate, with the lure of cheaper rent, tax abatements and other incentives.

In the mid-1990s Stamford was successful in convincing UBS Warburg, called Swiss Bank Corp. at the time, to move to the city by offering a $35,000 public subsidy per job and a downtown location to build its new headquarters. UBS Warburg is set to embark on the second phase of construction at the site.

But now these markets are experiencing space crunches, and escalating rents, of their own.

"Jersey City isn't the bargain it once was. Rents are in the 30s but, in Long Island City, they're in the 20s," Bernstein said.

Clearly the public Sector, including the New York City Economic Development Group, plays an important role in addressing this issue.

At the local level, Mayor Rudolph Giuliani has introduced initiatives in the past few months to help stem the exodus of companies from New York City. In May, the mayor announced the creation of an $8 million Printers Relocation Fund to assist companies seeking to relocate with the city's five boroughs. Under the program, the city will reimburse 50 percent of moving expenses, up to $200,000, for eligible companies. The fund will be administered by the EDC on behalf of the city.

"As the media capital of the 'world,

New York City takes great pride in its printing industry," Giuliani said. "To make it easier for printers to move within the city and expand their businesses, the city is establishing this fund."

And in April, the mayor announced the formation of Digital NYC: Wired to the World, a program to establish affordable, Internet-ready office space beyond the boundaries of Silicon Alley throughout the city's five boroughs. Among neighborhoods where such space is being developed include SI-HUB on St. George, Staten Island; HI-Way 125 on 125th Street in Harlem, and Broadband Brooklyn in Red Hook, Downtown, and DUMBO. The program will be managed by the EDC.

"New York City's high-tech community has exploded, employing more than 138,000 workers and generating more than $9 billion in revenue for the city in 1999," Giuliani said.

The issue is also being addressed at the state level. The state legislature, with the assistance of New York City and the Real Estate Board of New York, passed legislation earlier this year aimed at stem0 ming the exodus of companies south of .96th Street inManhattan. Companies that relocate to boroughs outside Manhattan are 'eligible for benefits such as 'site preparation and demolition grants..

Under the new law, the Relocation and Employment Assistance . 'Program (REAP) tax credit was tripled to $3,000 per employee during the company's first 12 years at the new facility. A tax abatement of up to $2.5 per square foot is available for the 'first three years of a company's relocation.

For people like Bernstein, these are additional, tools, to address the spce crunch.

"If I'm showing a space to a client, it may be the only one they see that day. Whereas, a few years ago they may have seen eight spaces," he said.