Year-to-date, there have been 54 leases of 50,000 square feet or more, of which 12 were subleases, according to C&W. Prominent among these larger deal-makers were financial services companies and law firms, belying the perception that these sectors are simply giving back space.

Law firm tenants struck the two largest deals in Q3: Wachtell, Lipton, Rosen & Katz's renewal of 249,255 square feet and Orrick, Herrington & Sutcliffe's sublease of 213,231 square feet, both at 51 W. 52nd St. And while the vacancy rate is likely to continue creeping upward, available sublease space declined in Q3 for the first time in nearly two years.

However, Harbert made it clear that the market hasn't reached bottom yet, forecasting another three quarters of softening rents, while James Delmonte, VP and director of research at Jones Lang LaSalle, says in a release that "it is still too early to determine if the market will continue toward improvement or simply stabilize."<pSimilarly, Studley's Q3 report likens the upsurge in leasing to the recent rallies of sales in both cars and homes, both of which have recently fallen back to earth. Pent-up demand may have fueled the Q3 leasing rally just as it spurred home sales and drove the cash-for-clunkers program.

"The potentially misguided notion that the market has hit bottom, and rents will now firm, assumes that the correction phase of this cycle is largely over, and demand is strong enough to stand on its own, without the critical supports of inducements to lease," says Steven Coutts, SVP of national research services at Studley, in a release. He expresses concern that taking tenant incentives off the table or hiking rents could put the brakes on leasing velocity if the upsurge in demand proves to be as tenuous as it was for big-ticket consumer goods.

At both the local and national levels, fundamentals may still have farther to fall. "It's not over yet, unfortunately, despite what Ben Bernanke may have told us," said Ken McCarthy, C&W's New York metro region managing director, at Tuesday's briefing.

McCarthy noted that while New York has so far escaped the brunt of the recession's impact--it has lost 80,000 office-losing jobs since the recession began, a smaller percentage decline than the US overall has experienced--"we're not going to see any hiring until businesses stop firing." Studley's report points out that corporate revenues and job growth are expected to remain negative well into 2010.

If investment sales activity recently has picked up alongside leasing, it's been a comparably low-volume year. The $2.7 billion in transactions over $10 million YTD is off 87% from the rolling average of recent years, Harbert said. Just six deals of more than $100 million each accounted for 63% of the dollar volume through the end of Q3; the $330-million sale-leaseback of HSBC headquarters at 452 Fifth Ave. was not included in C&W's YTD tally.

Frank Liantonio, VP of capital markets at C&W, noted that the availability of for-sale product has begun to improve, albeit very slowly. He said the glacial pace at which distressed properties have gone through the hand of special servicers has proven to be a drag on the market, and the recent changes in REMIC regulations haven't helped matters.