During a Wednesday media luncheon, Los Angeles-based CB RichardEllis presented its April 2008 Manhattan MarketView Snapshot andpointed out that despite slowing rent growth, all three Manhattanmarkets achieved all-time monthly rent highs in March. Midtownrents remained the strongest of the three markets, with Marchasking rents at $85.61 per sf, up from $84.27 in February and$72.25 a year ago. Leasing inched up month-over-month, but was 3.9million sf for first quarter 2008 compared to nearly three millionsf first quarter 2007.

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"We appear to have passed an inflection point, as the leasingmarket weakens, albeit at a gradual pace, due to the slowing USeconomy and turmoil in the financial markets" said John Powers, NewYork Tri-State Region chairman of CBRE, at the luncheon. "Manhattanshould see rents begin to dip, but we do not expect a flood ofsublease space to come on the market, as New York seems lessaffected by the recent job eliminations in the mortgage sector insouthern California and the southwest. At the same time, most ofManhattan's landlords, especially REITs, appear to bewell-positioned with low vacancy and strong balance sheets."

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[IMGCAP(2)]Powers also spoke on capital markets, noting that"the credit crisis has made it much harder to obtain debtfinancing, especially on larger transactions where a consortium oflenders is required rather than the once robust CMBS market. Volumeis down tremendously from last year's record high of $12.8 billionin the first quarter to $1.5 billion in first quarter 2008, butcompares favorably with the $1.1 billion of Manhattan office salesin the same period of 2005 and the $2 billion in sales in 2006," hesaid.

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"Job growth is the best measure of commercial real estate'seconomic health, and right now employment is contracting," addedRaymond Torto, global chief economist at CBRE, who also spoke atthe company's luncheon. "The effects are being felt especially inhousing-dependent economies in the southwest and Florida. However,all markets enter this phase of the cycle in healthy condition. Thesharp rise in office rents over the last few years has provided acash flow cushion to existing owners even if market rents turndown." Torto added that the 'investor strike' is retreating, buthas not ended. "Many capital sources sense opportunity, but no onewants to be first and wrong on a purchase or sale. As a result, thebid-ask spread remains wide as buyers and sellers await pricediscovery and the market establishes a new equilibrium price."

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[IMGCAP(3)]Locally based Cushman & Wakefield's first quarterreport for the Manhattan market, like CBRE's report, showscontinued increases in asking rents for office space throughout thecity, despite a slowdown in leasing activity and an increase invacancy rates. Overall asking rents for Manhattan reached $67.13per sf at the end of the first quarter, up more than 25% from$53.43 at this time last year. Class-A asking rents soared morethan 23% year-over-year, reaching an average of $79.78 per sf. Atthe same time, leasing activity continued to slow. At the end ofthe first quarter, five million sf in new leases had been signed,about 8% off compared to first quarter leasing in 2007, the reportfound.

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"Office leasing has slowed in the first quarter in directresponse to economic uncertainty," said Joseph R. Harbert, COO forCushman & Wakefield's New York Metro Region, at the firm'sbreakfast presentation Tuesday morning. "Although we have not seenfinancial industry write-offs turn into major layoffs in New York,we have seen that financial services sector leasing demand hasweakened."

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Following C&W's Q1 report presentation, Bruce Mosler,president and CEO of C&W, spoke briefly to attendees, notingthat commercial real estate is facing an uncertain economy from aposition of fundamental strength. "Until this quarter, years ofuninterrupted job growth fueled office leasing and investmentdemand and limited new construction kept supply in check in mostmajor US markets. On top of the fundamentals, New York, inparticular, has a position of strength stemming from its reputationas the global financial and business capital," he said.

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[IMGCAP(5)]Mosler added that the changing market conditionscreate new opportunities for tenants that have been squeezed inManhattan's tight market for the past several years. He furthernoted that Manhattan continues to offer room for rent growth and"deals are still getting done. This marketplace is in pretty goodshape," he said. "From a standpoint perspective, the future isbright."

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Harbert explained that as far as investment sales goes, thecurrent lending environment has caused a shift in the investorprofile, with a noticeable increase in activity from foreign buyersand institutional investors. Foreign investors accounted for 45% ofsales closed and under contract in the first quarter, a sharpcontrast to last year when this type of investor accounted for only15% of Manhattan's sales volume. "Recent actions by the FederalReserve and the major financial institutions have made it clearthat efforts are being made to recognize losses and put them behindus," Harbert said. "This is promising for the marketplace, and hashelped to build confidence."

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[IMGCAP(4)]Jones Lang LaSalle also reports that despite a risein overall office vacancy rates in every submarket here, buildingowners still achieved moderate rent increases in the first quarterof 2008. The firm's Q1 '08 report shows class A buildings inManhattan recording both the largest rent hikes and the biggestincrease in vacancy rates. "Given the current economic climate, itis not unexpected for rents to begin leveling off," notes JamesDelmonte, VP and director of research.

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As Grubb &Ellis found in its Q1 '08 outlook, which GlobeSt.comexclusively reported on Tuesday morning, JLL forecasts relativelyflat rent growth throughout New York City for the remainder of theyear. Office vacancy rates rose throughout the city in the firstquarter of the year, JLL says. Overall vacancy rates rose 7.6% inthe first quarter of 2008, increasing to 7.7% from 7.1% at year-end2007. Class A vacancy rates grew 9% in the same time period, risingto 7.2% from 6.6%.

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Natalie Dolce

Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.