Jan Svec, a director in Fitch Rating's REIT group, tells GlobeSt.com that it is uncertain at this point how financial job loss will affect the office market here, but she says that the good news is that things are "going to be better than last time," although as financial firms continue to make cuts, "things could change."

[IMGCAP(3)]Hugh Finnegan, an attorney in the real estate group at Sullivan & Worcester LLP, agrees with Svec that the office market might not be as dramatically affected as one might expect. "There is a huge difference between this cycle on the last heavy down cycle of the late '80s and early '90s," he says. "Although new towers are being built now, there are few buildings with available space."

He says that the key will be the number of layoffs. "The expectation is that the numbers will not be significant enough to soften the market in any dramatic way." Finnegan notes that the market "certainly has not softened to date." He adds that "there are many tenants who wish it [financial firm trouble] would soften the market. The numbers are quite high and do not appear like there will be much of a move downwards."

Svec says that because of the supply constraints, the downturn is going to be better than last time. "There has not been a lot of speculative development," she says, adding that some challenges might be seen in the next couple of years. "Up until this point, the market has been tight." Svec explains that so far, there have been rumblings of some sublease space on the market, and leasing velocity has slowed.

[IMGCAP(2)]According to a Jones Lang LaSalle report as of the first quarter 2008, vacancy rate is currently at approximately 7.7%, and if there were 40,000 jobs cuts, vacancy rate could reach 10%. James Delmonte, vice president and director of research at JLL, tells GlobeSt.com that those numbers figure that each employee accounts for 250 sf, but he says it varies by industry.

Delmonte agrees with Svec, in that we will be stronger this go-around than the last downturn. In the late '80s, there were a lot of spec buildings, which led to higher vacancy rates, he says. He explains that many of the new building stock that is currently coming online won't have much of an effect on vacancy rates because it is preleased, "which has helped the market a lot."

Delmonte did say that he is seeing a slight uptick in vacancies, "but rents have not softened as of yet, because some of the space that has entered the market is high quality space." Delmonte and Svec have both noticed that leasing velocity has slowed.

Deborah Jackson, executive managing director of Weiser Realty Advisors LLC, tells GlobeSt.com that "with the decline in profits that these investment firms have been posting and the level of the layoffs that we have seen to date, those that have been recently announced, and those that have yet to come, one would conclude that there would be a reduction in space needs and as such, an impact on the office market in the city. However, mitigating this impact near term is: the amount of space that these firms occupy that is owned; and the strength of the office market."

She continues that in regard to the owned space, "we may see some subleasing of space that was previously owner-occupied. This would add to the inventory of available space. However, the city has low vacancy and high rent." While she says that vacancy may increase, she explains that "new inventory in the city , which would typically increase vacancy--when opened--is preleased; and rents are very high and vacancy is low in the city." Jackson says that one of the factors that could alter this though, would include increased unemployment and reduced space needs. "This will eventually impact the office sector, but it needs to play itself out for a while and may be seen first in the lesser quality locations and buildings through lower rents and higher concessions."

She concludes that "Manhattan is not a market with double digit vacancy--seen elsewhere in the country. Still, the financial sector occupies close to a third of the city's office space and so when it coughs, there has to be an eventual ripple effect."

In regards to the latest Citigroup news, a Citigroup spokesperson did not return GlobeSt.com queries by deadline for confirmation or for comment regarding what offices would be impacted. In April, Citigroup reported a net loss of $5.1 billion in the first quarter. According to a company release at the time, Vikram Pandit, CEO of Citi, said that "our financial results reflect the continuation of the unprecedented market and credit environment and its impact on our historical risk positions. During the first quarter, valuations of our sub-prime related exposures in fixed income markets and leveraged finance assets have further declined and credit costs in our consumer lending businesses have increased. Despite the negative factors in the broader markets, we continue to see strong momentum throughout the organization with robust volumes in many of our products and regions."

According to reports, Citigroup is already more than halfway through the 6,500 cuts. In total, Citigroup has revealed 13,200 job cuts this year. Reports note that Pandit and John Havens, head of Citi's institutional clients business, have been looking to "reduce the size of the division as well as change its business mix to reflect the deterioration of market conditions."