A New York law firm has agreed to lease space in a Times Square office tower that is being seized by banks led by Citicorp.

The deal, which has not yet been announced, would be the latest evidence that the oversupply of new office space in New York is beginning to diminish.

Mendes & Mount will lease the space in 750 Seventh Ave. originally occupied by Olwine, Connelly, Chase O'Donnell & Weyher. Olwine leased 143,000 square feet, or about 20% of the office space in the building, in 1990 but went out of business without ever paying rent.

Since then, the developer, Solomon Equities, has placed the building under bankruptcy protection. The secured lenders, led by Citicorp, are executed to gain control of the building next month to settle $205 million of secured loans.

Price Waterhouse recently signed a 15-year lease on 350,000 square feet in a nearby building, promptly optimism that new space on the West Side of Manhattan soon will begin to attract tenants.

Skeptics noted, however, that the lease deals on new space mark the loss of tenants in older buildings.

Price Waterhouse, for instance, would move out of space in Citicorp Center.

Separately, Crain's New York Business reported Monday that Citicorp was negotiating to sell a million-square-foot building at 40 Wall St. to investor Joseph Neumann for $20 million.

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