Robert Knakal, chairman of Massey Knakal Realty Services, tells GlobeSt.com that if Goldman Sachs or Morgan Stanley is sold, the first issue will be the resultant job losses and how they will affect two things; demand for both office space, and residential units--particularly new construction. "With the uncertainty in the market, these potential transactions, whether they happen or not, will affect demand for residential units. The residential market has historically be a beneficiary of demand from investment bankers those that the industry supports."

Knakal explains that the second issue will be how these potential transactions will affect the supply of available debt and equity for real estate transactions. "Wall Street was the primary driver of the CMBS market which provided significant capital for larger sales transactions. This market had all but evaporated months ago and it was thought that 'the Street' would eventually devise a similar product to fill the void. This may have been in the form of 'covered bonds,' which are commonly used in Europe. The current volatility will undoubtedly delay any solution which may have been implemented."

The third consequence, he says, is whether real estate assets will have to be sold by these firms as part of a sale or reorganization. "It has been very positive that the Lehman headquarters building has been purchased so quickly by Barclays demonstrating the attractiveness of quality product. The real estate portfolios of the banks--consisting of fee owned properties and real estate related assets--are very diversified, so an increase in the availability of these assets could affect many market sectors. If dispositions are required, dramatic increases in supply could exert additional downward pressure on prices."

Another industry source, agrees that the effect on real estate when banks are sold could be profound and long-lasting, both in terms of leases and lending. "The effect on trading properties will be significant and because both firms [Morgan Stanley and Goldman Sachs] are deep in the funds world."

Jackson says that "if this were any other city, the impact might be greater." She explains that in the near term, "the impact will be greatest in the Downtown area. …The leasing of space will slow and the World Trade Center development will take some time to successfully develop and lease." She says that there has already been a weakening in the area and expects that it will continue. "In the midtown area, market factors are stronger and the impact should not be that great--demand is still strong for space, vacancy is relatively low and rents are high. We might see a lowering in rents and increase in concessions in the lesser class buildings and in those assets that are fringe located."