Financial services firms lead the way, accounting for 25% of transactions last year. "It's all financial all the time," Krasnow said, adding that many companies including the Bank of Scotland are "poised to make major commitments." Financial services firms accounted for approximately 1.5 million sf in the fourth quarter and for a total of 4.1 million sf in the year. Law firms were the second most active industry with 2.7 million sf leased.

And Midtown is the hot market, accounting for approximately 67% of all transactions. Overall average rents fell to their lowest price in five years, averaging $39.47 per sf. Of note is a nearly $15 difference in average asking rents between Midtown and Downtown over the past three quarters. Krasnow said this is the widest margin in at least two decades. He anticipates the Downtown market will heat up as there is continued competition for large blocks—250,000 sf--of class A space in Midtown.

"There are less than six available. They're going to look Downtown. We see the market for large blocks of quality space tightening in Midtown and anticipate that there will be a need to look at alternatives Downtown. In addition, we expect continued interest Downtown due to the enormous spread between higher rents in Midtown and lower rents Downtown."

Krasnow called Midtown South the "dark horse" of 2004 because its vacancy rate keeps chipping away with five million sf of leasing activity last year. Its vacancy rate fell to 10.2% from 11.2% a year ago. Part of the activity was the large leases by apparel retailers Ecko Unlimited and Nike, which combined leased more than 330,000 sf in Midtown South.