Well, that is that. We wrote in this week's print Observer that the reign of landlords atop the Manhattan office market has decisively ended. The credit crisis wounded it, and the financial meltdown of last month finished it off. Further proof above from Cushman & Wakefield.

Companies leased 15.7 million square feet of office space in the first nine months of 2008. Barring a year-end bump, the total number of square feet leased will likely not exceed that in 2003 and maybe--just maybe--2001, making 2008 the paltriest year this decade for office leasing.

Midtown south, that region of heavily commercial Manhattan from roughly Houston Street to 42nd Street, may be the crystal ball for New York's financial health. It has a lot of the island’s cheapest office space; and, yet, that same space is emptying slowly as companies trickle out sans successors.

Midtown south’s scruffier buildings—think old Silicon Alley hangouts hastily rewired 15 years ago, groaning under the weights of sporadic upkeep and old infrastructure—have considerably lower rents than midtown’s gleaming towers: In September, the average midtown south asking rent was $52.86 a square foot, according to CB Richard Ellis; in midtown, it was $84.  read more »

Calm down! That was the message CB Richard Ellis honchos impressed upon reporters at this morning's end-of-third-quarter breakfast, at which the brokerage released a "Supply & Demand Special Report."

"Everybody's knee-jerk reaction this month has been wrong," said Simon Wasserberger, senior vice president of CBRE's New York tri-state region consulting group, referring to predictions that the demise of Lehman and other banks would dump massive amounts of sublease space on the market, causing big vacancy rate increases and sizable rent declines. "People underestimate the stability of Manhattan rents."

Mr. Wasserberger went on to argue that Manhattan is incredibly supply constrained. At most, there will be 7 million feet of new construction in the next four years, which, in addition to whatever sublease space comes on the market, will comprise merely a drop in the bucket that is New York's 400 million-square-foot marketplace.  read more »

The above chart from Colliers ABR says it all about the Manhattan office market as it enters 2008's final stretch. Vacancy rates, including for top-flight Class A space, continue to rise as asking rents remain flat. The Wall Street crisis, damaging as it is to one of Manhattan's prime office leasers, financial services, won't help matters in 2009.

The projected 80,000 to 90,000 in office-based job losses between now and the end of 2009 could be enough to drive the Manhattan office vacancy rate well into double-digit percentages. A new report from Colliers ABR predicts the rate could rise to somewhere between 12 and 13 percent, well above the September rate of 7.4 percent, as companies shed space after shedding employees.

But there's two things working in the market's favor (and the favor of landlords and landlord brokers):  read more »

Tucked into Charles Bagli's gong-rattling New York Times pronouncement on the end of the local real estate boom were three gems to illustrate the point.

HSBC pulled out of a major lease at Larry Silverstein's downtown gem:  read more »

A new CB Richard Ellis report shows a marked annual drop-off in Manhattan office leasing from August 2007 through August 2008.

Companies leased 2.29 million square feet of space in August 2007, and 1.06 million last month. The availability and vacancy rates understandably increased over the 12 months from August to August.

Why the drop-off? It doesn't have anything to do with the events the past two weeks in the financial services industry, the biggest leaser of the city's top-flight office space. (It's likely tied to the general decline in the national and local economies, and is also a product of furious office leasing in months past--there's just not that much space left to lease.)

The current Wall Street crisis, however, is likely to further curb the appetite for Manhattan office space. More on what pessimistic brokers have to say.

“We have seen on Wall Street the cycle of greed turn to fear," said John Powers, chairman of the New York Tri-State Region for CB Richard Ellis, at CoreNet's New York City Market Update luncheon this afternoon. "Now we’re seeing pain. It will be a while before we see hope. And that is the cycle.”

It wasn't the happy-go-luckiest of real estate luncheons today on the eighth floor of the Time Life Building.

As brokers dug into their filets of salmon, Marisa Di Natale, a senior economist at Moody's Economy.com, imparted the harsh truth as she saw it:

"We believe we are in a recession right now and that we have been in a recession since fourth quarter last year,” Ms.  read more »

In the Manhattan office market, the storyline since last summer has been one of decline measured by greater vacancy amounts and static rents. The narrative held coming out of this summer.

A new report from Colliers ABR shows a Manhattan office vacancy rate of 8.7 percent in August, essentially unchanged from July and 2 percentage points higher than in August 2007. The average asking rent was also basically the same in August as in July (and August 2007) at $65.89 a square foot.

There was no roaring out of the summertime into an especially active fall.  read more »

The last decade may have been awesome for the Fat Cats of commercial real estate -- but the next one isn't looking as promising.

Tax breaks designed to spark commercial real estate development in New York City amounted to $500 million last fiscal year, and the last 10 years saw such tax breaks more than double, according to Reuters, which recapped an Independent Budget Office report issued today.

Unfortunately for commercial real estate developers -- who are already languishing, thanks to the scarcity of financing -- state-wide reforms advocated by Mayor Bloomberg that kicked in this June are expected to shrink those tax breaks:

The Independent Budget Office said its study "provides strong evidence that (the) Industrial and Commercial Incentive Program benefited a far broader group with more generous benefits than might have been necessary to meet the policy goal.

 read more »