With JP Morgan Chase's acquisition of Bear Stearns and the continuation of financial firms posting billions of dollars in write downs—including recent announcements by UBS and Deutsche Bank—the financial services industry as a whole began to dispose of space throughout Manhattan, according to the G&E report. Available space for sublease jumped to seven million sf, with the addition of one million sf in the first quarter. The sharp increase was precipitated by the 599,000-sf block of space placed on the market by Goldman Sachs at 77 Water St., the 140,000 sf marketed by the Royal Bank of Scotland at 7 World Trade Center, the 110,000-sf sublease put on the market at 2 World Financial Center by Nomura Holdings and iStar Financial's return of 107,000 sf at 1095 Ave. of the Americas.

Regarding the addition of one million sf of sublease space from financial firms, Richard Persichetti, client services manager for Grubb & Ellis, tells GlobeSt.com that "this is only the beginning of a trend as more financial firms likely will place additional sublease space on the market over the next three to six months." Over the past four years, the financial services industry accounted for more than 40% of the leasing activity in Manhattan, but with the financial markets in turmoil, Grubb & Ellis expects overall demand to remain flat throughout the year. A slowdown in leasing velocity has already been witnessed in the first quarter as only 7.6 million sf in lease transactions occurred. A drop in demand by 15% compared to one year ago insinuates a weakening market. A more telling indicator, the report says, is that 48% of the sf leased this year were renewals, a significant increase compared to last year when renewals only accounted for 19% of the first quarter's activity. The lack of new transactions in the market suggests that tenants are in standby mode as the status of the economy unfolds.

The report says that one year ago, tenants with large space requirements had limited options in Manhattan, with only 26 available blocks of space greater than 100,000 sf. By the end of the first quarter, 14 new large-block availabilities hit the market, as the year-over-year total more than doubled with 53 such blocks of space in the available supply. Still, landlords kept pricing in Manhattan stable, as direct class A asking rents edged up $1.14 to $90.20 per sf. However, the increase is a noticeable decline from the $4.35 per sf quarterly average rise recorded over the past 18 months. Persichetti tells GlobeSt.com that "aside from the 53 blocks of space that are actively being marketed, there are, at a minimum, an additional 20 large blocks of space that could be made available over the next 18 months."