The FIRE industries (finance, insurance and real estate) will continue to dominate the local economy, with financial services jobs accounting for 13% of total employment, more than double the national average for the sector. A diverse employment base will help Manhattan weather the current lull.

As job growth slows, experts are expecting construction starts to drop off and rent gains to be constrained in the coming few months. A renewed focus on profitability will put pressure on asking rents, and the gap between actual and asking rents will continue to increase. Owners will have to compete to attract tenants, and it will be a lessee's market for a change.

"The first half of 2001 will see new job formation fall off considerably, but a rebound is expected by the end of the year," says Mitchell LeBar, regional manager, Marcus & Millichap. "Investors will continue to acquire office properties here. With rental growth slowing in the near term, there may even be some bargain buys in the market, at least by New York standards." The large amount of sublease space on the market resulting from layoffs and bankruptcies will also restrict rent growth.

There's no place like New York, however, and even as the current economy softens, investors will continue to feature Manhattan office property as flagship material in their portfolios.