With JP Morgan Chase's acquisition of Bear Stearns andthe continuation of financial firms posting billions of dollars inwrite downs—including recent announcements by UBS and DeutscheBank—the financial services industry as a whole began to dispose ofspace throughout Manhattan, according to the G&E report.Available space for sublease jumped to seven million sf, with theaddition of one million sf in the first quarter. The sharp increasewas precipitated by the 599,000-sf block of space placed on themarket by Goldman Sachs at 77 Water St., the 140,000 sf marketed bythe Royal Bank of Scotland at 7 World Trade Center, the 110,000-sfsublease put on the market at 2 World Financial Center by NomuraHoldings and iStar Financial's return of 107,000 sf at 1095 Ave. ofthe Americas.

Regarding the addition of one million sf of sublease space fromfinancial firms, Richard Persichetti, client services manager forGrubb & Ellis, tells GlobeSt.com that "this is only thebeginning of a trend as more financial firms likely will placeadditional sublease space on the market over the next three to sixmonths." Over the past four years, the financial services industryaccounted for more than 40% of the leasing activity in Manhattan,but with the financial markets in turmoil, Grubb & Ellisexpects overall demand to remain flat throughout the year. Aslowdown in leasing velocity has already been witnessed in thefirst quarter as only 7.6 million sf in lease transactionsoccurred. A drop in demand by 15% compared to one year agoinsinuates a weakening market. A more telling indicator, the reportsays, is that 48% of the sf leased this year were renewals, asignificant increase compared to last year when renewals onlyaccounted for 19% of the first quarter's activity. The lack of newtransactions in the market suggests that tenants are in standbymode as the status of the economy unfolds.

The report says that one year ago, tenants with large spacerequirements had limited options in Manhattan, with only 26available blocks of space greater than 100,000 sf. By the end ofthe first quarter, 14 new large-block availabilities hit themarket, as the year-over-year total more than doubled with 53 suchblocks of space in the available supply. Still, landlords keptpricing in Manhattan stable, as direct class A asking rents edgedup $1.14 to $90.20 per sf. However, the increase is a noticeabledecline from the $4.35 per sf quarterly average rise recorded overthe past 18 months. Persichetti tells GlobeSt.com that "aside fromthe 53 blocks of space that are actively being marketed, there are,at a minimum, an additional 20 large blocks of space that could bemade available over the next 18 months."