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NEW YORK CITY-”It’s not like the savings and loan crisis that was somewhere else,” said John Powers, chairman of the New York tri-state region for CB Richard Ellis. “This one is very close to home.”

Powers, speaking Friday at a luncheon sponsored by CoreNet Global’s New York chapter, was referring to the financial services upheaval that began earlier this month with the federal takeover of Fannie Mae and Freddie Mac and intensified last weekend with the bankruptcy of Lehman Brothers, the sale of Merrill Lynch and the bailout of AIG. He said Wall Street hasn’t seen anything like it since the Great Depression. In fact, the crisis gathered momentum so rapidly that fellow panelist Marisa Di Natale said she waited until the last minute to put her presentation together, “because things are changing so rapidly.”

However, even with these recent developments, Di Natale, senior economist with Moody’s Economy.com, said the downturn nationally would be less dramatic than the recessions of 1990 and 2000-2001, although she would now give the New York region a 25% chance of suffering a “severe” recession. With that said, Di Natale predicted that the loss of 100,000 office-using jobs in the New York region that will occur by the trough of the current downturn will be considerably less than the drop-off of 150,000 jobs seen in the previous recession. Accordingly, Powers said the effects on New York’s commercial real estate, while considerable, would not reach the depths of previous troughs.

Powers predicted that the Manhattan leasing market would probably end 2008 with a lower leasing velocity than the post-9/11 figure of 18.8 million sf recorded for 2002. Investment sales velocity here is already down sharply from the previous year—from 53.7 million sf sold in 2007 to 8.5 million sf through Q2 of this year–and much of the square footage sold YTD stemmed from the disposition of the Macklowe Properties portfolio. Asking rents, which grew 20% between April ’07 and April ’08, have increased by only 1% in the six months since then.

On the other hand, Powers noted that the city’s real estate is performing “very, very well” for the most part. He said at present, the top 10 landlords in Midtown, which among them control 42% of the office space in that market, enjoy both low vacancy rates and low leverage levels. Currently, there are 16 blocks of available contiguous space of 250,000 sf or more throughout Manhattan. “Historically, this is pretty low,” Powers said, who also predicted that sublease space would increase by 3% over the next several months, less than the 5% rise seen during the previous downturn.

In terms of how much space will come onto the market due to layoffs in the financial services sector, Powers said the jury is still out. However, he noted that Barclays PLC’s $1.75-billion purchase of much of Lehman’s assets, including its one million-sf headquarters at 745 Seventh Ave., is likely to diminish the total.

Also helping to mitigate against a sharp rise in empty office space in the next two years will be the limited growth in supply. By 2010, Manhattan’s total space will be only eight million sf more than it was in 2000, Powers said. The intervening decade saw the loss of millions of sf due to both condominium conversions and 9/11, and the increase from 352 million per sf in 2000 to a projected 360 million sf in 2010 represents a compounded annual growth rate of .05%, he said.

One segment of financial services that isn’t likely to downsize in coming months is hedge funds, said Powers. “Hedge funds represent a continuation of the de-intermediation in financial services that has been going on for many years,” he said. “They’re here to stay.”

Even so, Di Natale said the worst may be ahead for the New York metro area. It has been slower to feel the effects of the downturn than the US as a whole, she said, and therefore will recover later. “There still hasn’t been a significant employment downturn in New York City” as measured by the US Bureau of Labor Statistics, she said. Powers said he was concerned about the effect the loss of Wall Street tax revenue would have on the city’s budget.

What the current economic slump should be called was a matter of some disagreement between the two panelists at the CoreNet presentation, which was titled “New York Market Update: Rebound or Collapse–What Lies Ahead?” Di Natale said her firm believes “we’re currently in a recession and may have been in a recession since the fourth quarter of last year,” while Powers qualified the phrase “recession 2008″ with a question mark on his PowerPoint slides.

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