Barbara Nelson is editor of Real Estate New York

NEW YORK CITY-The balance between supply and demand in the office market in Manhattan is reaching critical mass, with repercussions being felt throughout the market by the end of 2007, says David Arena, president of Grubb & Ellis New York, at a forecast breakfast Wednesday.

In the last two decades, development of speculative office space, due to high construction costs and lack of developable space in Manhattan, has been slow. "We are critically undersupplied," Arena says. "There's just 25 million sf available amongst the 360 million sf of office space in New York City."

Four large financial services firm in Midtown are now looking to expand with no real options to do so. "They need space for their traders. One firm has closed off a stairwell between trading floors to expand," Arena says.