Year-to-date negative absorption Downtown has already reached1.8 million square feet, compared to 523,000 square feet at thistime a year ago, EVP Bruce Surry said at a media briefing Wednesdaymorning. For example, AIG gave back a block of half a millionsquare feet at 70 Pine St., its former headquarters building, andthat is now counted in the totals. But Cohen said that predictionsof Downtown's availability rate peaking at 21% assume that none ofthe space being vacated by major financial firms will be leased. Amore accurate projection, Surry said, is a peak of 16% to 17%.

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That negative absorption may turn out to be smaller than feared.For one thing, although Bank of America Merrill Lynch hasn'tpublicly disclosed its plans as yet, it now appears that the firmwill have "some footprint" Downtown, Cohen said. FollowingMerrill's absorption by BofA in late 2008, the general belief wasthat all of its Downtown space—more than four million square feetamong three locations—would go dark.

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In fact, Cohen said one of the submarket's demand drivers willbe large tenants. "There are about two million square feet of largespace users in the market that are seriously considering Downtown,"Cohen said. He declined to name all of them, but noted that one ofthem is rumored to be Deloitte.

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Another factor will be spillover from Midtown, where top-tierasking rents can be as much as 30%. "Downtown is generally areceiver of tenants from Midtown," Cohen said. There's also theincreasing diversity of Lower Manhattan's economy: 47% of itscommercial tenants are outside the FIRE sectors.

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Even so, CBRE's white paper and its MarketView for Manhattan asa whole charted some of the heavy weather rolling in across LowerManhattan. With 260,000 square feet of office space leased there inMarch, volume is still well below the 60-month historical averageof 375,000 square feet per month. By contrast, Midtown's Marchtotal of 1.2 million square feet was twice the tally for March '09.And Downtown's average asking rent of $38.81 will decline furtherwhen availabilities at 70 Pine are factored in.

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Although Downtown's availability rate of 13.5% is the lowest ofthe three submarkets, it's climbing, and the surplus of space couldpotentially enlarge when the first of the World Trade Center Towerscome on line. Yet Cohen predicted that the appetite for new officespace in a market where 80% of the space is more than 25 years oldwould work in the WTC's favor.

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Asked whether Silverstein Properties Inc. had a good chance ofpre-leasing 500,000 square feet of its planned WTC Tower 3, thusmeeting one of the conditions for financing assistance from thePort Authority of New York and New Jersey, Cohen responded, "Ifthere's anybody Downtown I'd bet on, it's Larry Silverstein."

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.