Marcus Rayner, principal in CRESA's New York office, says it suggests that tenants "have an increasingly broad range of choices and options under favorable terms, especially if they will consider shorter-term leases. On long-term deals, owners are maintaining a tougher negotiating position."

The report also notes that the gap in asking rents between direct and sublease space is as much as 40% in some submarkets. "Tenants disposing of space need to reassess pricing on a monthly basis to remain competitive," according to the report. "The ability to be flexible during negotiations has never been more important." Rayner tells GlobeSt.com that this is a problem affecting all areas of Manhattan. "We're seeing notable price corrections all over."

CRESA's report for the first quarter of this year indicates some sign of firming in Class-A downtown space, with the vacancy rate declining nearly a percentage point, compared with the last quarter of 2002, to 11.77%, not including "hidden space" factors. Average asking rents rose by 10 cents to $34.52. However, the total Class-A downtown vacancy rate, including sublease space, remains at a high 16.15%.