On the retail front, the area is seeing more demand from both major US chains and international retailers. "Retailers are eager if not anxious to get into this marketplace," Harbart says.

Among the new leases signed during the first quarter in the retail sector Harbart cites are French apparel-chain Anne Fontaine, on Madison Avenue; an Ann Taylor flagship on Fifth Avenue and two new leases for Crate and Barrel's new CB2 concept.

While office leasing during the first quarter was down to five-million sf from 5.9 million sf during the same year-ago period, companies are paying higher rents than ever. Average rents in Manhattan climbed to a record $53.43 per-sf, while class-A rents in Midtown hit an all-time best of $70.77 per-sf. Previous highs were set in the third quarter of 2000.