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NEW YORK CITY-While it’s too soon to talk about a rebound in the Manhattan commercial market, there are signs that the rate of decline is slowing, Cushman & Wakefield said in a report released Tuesday. Additionally, the market has held its ground as the fallout from the recession hasn’t been as damaging as many had feared, says C&W. “For the first time in almost a year, there appears to be a light at the end of the tunnel,” the report states.

Among the biggest surprises of the current downturn, said C&W’s Ken McCarthy said at a media briefing Tuesday morning, is that the rate of job loss in Manhattan has been lower than the national rate. Locally, it’s 3% compared to 4.7% nationally, despite the fact that much of the job loss here has come from the financial services sector.

McCarthy, managing director of research for the New York metro region, cited some reasons for Manhattan’s comparatively good showing. They included: a smaller base of financial sector jobs locally than there were in the early 1990s, an infusion of TARP funds that may have kept layoffs in check and the city’s relatively small manufacturing sector. Nationally, manufacturing companies have produced about 30% of the job losses, more than any other sector.

Whatever the cause, the long-term implications for local employment–and hence, commercial real estate–are positive. “The employment decline in New York City will not be as large as previously thought,” McCarthy said, although that could still mean a 14.5% office vacancy rate at the market’s trough. C&W reported Tuesday that office availability in Manhattan reached 41.2 million square feet in the second quarter, the highest level in four-and-a-half years, although the 3.7 million in space added to the market in Q2 was about one-third less than the 5.7 million square feet put back on in Q1.

Against a backdrop of encouraging signs, “Things are better than they were in the first quarter,” said Joseph Harbert, COO of the New York metro region. Even so, Harbert noted, new office leasing activity year-to-date has been low even by the standards of the last recession. If the 6.4 million square feet of total leasing in Manhattan in the first half of the year were replicated in the second half, 2009 would go down as the worst year for office in two decades, according to the C&W report.

However, Harbert said there’s evidence that this won’t be the case. For one thing, Manhattan’s vacancy rate, which has climbed steadily over the past year, held at 10.5% from May to June. “We don’t know yet whether June is an anomaly or an inflection point,” he said, adding that “two months is not a trend.” And while two-thirds of the leasing activity YTD has been in deals of 25,000 square feet or less, there were eight deals of 50,000 square feet or more in Q2–twice as many as in Q1.

Investment sales activity YTD has been even sparser, with $1.7 billion in closed deals, compared to $13 billion by this time last year. But Harbert pointed to a pair of $100-million-plus transactions that are expected to close in the third quarter: the sale of AIG headquarters at 70 Pine St. and 72 Wall St., the price of which has been estimated variously from $110 million to $140 million; and the $600-million deal for Worldwide Plaza at 825 Eighth Ave. As more sales occur, there will be more data points to establish pricing, Harbert said.

Moreover, Jon Caplan, EVP of the capital markets group, said “there’s just the beginnings of signs of some lenders coming back into the marktplace.” Caplan noted that smaller deals are in a better position to take on newly minted debt; for larger ones, Harbert said, assumption of existing debt or seller financing still hold sway.

Manhattan’s retail sector thus far in ’09 has been marked by what Harbert called “not a lot of ups, not a lot of downs.” In other words, the market has seen neither much new availability nor much absorption, with vacancy rates generally holding steady from Q1 to Q2.

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