With the financial sector still a major driving force in the Downtown market, recovery in lower Manhattan may be slower than expected, adds Robert L. Freedman, executive chairman of FirstService Williams. "Normally, there would be little question that demand from the financial sector would start to grow in 2010, a full year after the economic recovery began. In this cycle, however, Washington has set out to change the regulatory structure and rules related to business operations in the financial sector. Coupled with the potential increase in capital gains taxes, investments in business operations and new hiring may be delayed."

Freedman notes that additions to available space on the overall Manhattan market have slowed each month, and that over the last two quarters, gains in the overall availability rate have become much slower.

Additional highlights from FirstService Williams' fourth quarter analysis include:

Though Manhattan's overall availability inched up in the fourth quarter to 13.8%, from 13.4%, much of this increase occurred in the first half of the quarter.

The slight increase in Midtown South availability is not as steep as it first appears. The rate climbed to 11.7%, up from 11.1% in the third quarter, but that rate was down from 11.4% in the second quarter. Over a six-month period, the availability rate rose only 0.3 percentage points.

Nearly two-thirds of the increase in Midtown South available space over the past quarter was attributable to two buildings--450 W. 33rd St. and 350 Fifth Ave. (the Empire State Building).

Absorption along Park Avenue, Fifth Avenue and Avenue of the Americas totaled in excess of one million square feet in the fourth quarter, with approximately 200,000 square feet of space leased at 399 Park Ave. alone.

However, 45 Rockefeller Plaza, 1221 and 1220 Avenue of the Americas each added at least 150,000 square feet of space to the market in the fourth quarter.