Security concerns and the recent trend of major companies to decentralize have helped render large parcel activity a rarity in lower Manhattan. Last Wednesday $113.9 million in Liberty Bonds were awarded for construction of a 10-story office tower in Brooklyn, into which The Bank of New York will move 1,400 employees as part of its commitment to diversify its operational base. The bank has agreed to keep 7,700 jobs in New York City for at least 12 years. Click here for GlobeSt.com coverage of the proceedings.

Additional findings in the C&W report include:

The New York City Office of Management and Budget predicts it will take until 2006 for employment levels in New York City to return to June 2001 levels. The sectors that have experienced the greatest job losses have been banking and securities, traditionally a major component of the Downtown tenant base. However, "financial services are still the largest pieces of the pie for those taking space Downtown," said Sicola.

Manhattan has retained 72% of tenants affected by events at the World Trade Center, despite initial fears that many companies would flee the area. Of that percentage, however, 58% opted to move out of Downtown, a major factor in the increase in vacancy and decrease of rental rates.

The Downtown forecast for 4Q is that the vacancy rate will continue to increase to above 14%, and that asking rents will then sit at near $39.60 per sf. Vacancy rates should peak near 2006, after the 4.7 million sf of office currently under construction in Manhattan comes online. Rates should hit 12.3% vacancy by that time, with asking rents near $42.50. Forecasting beyond this date is difficult, claims the report, mainly due to unresolved issues of how the WTC site redevelopment will proceed.