“Finance has been essentially flat since 2011 but that's been offset by growth in technology and other industries,” he said. “New York City has recovered 78% more jobs than all those that were lost in the recession, so the city continues to perform better than the rest of the country.”

And as the chokehold continues on space in Midtown South, the area to watch is Downtown, according to Andrew Peretz, EVP. Teh area saw an increase in total leasing activity year-over-year, with an increase of 1.3%. At the end of the quarter, the Downtown market closed with a vacancy rate of 8%, a drop of 1.2% from the same time last year.

Meanwhile, he noted, TAMI companies, law firms and other businesses have picked up where financial services left off in the Downtown submarket while financial firms have started to come uptown. “It used to be that there was an imaginary wall on Canal Street, with creative firms on one side and financial services on the other,” Peretz noted. “Now companies are climbing over that wall and, like the Berlin Wall, it's come down; it's gone.”

Today, approximately 20% of the Downtown market consists of TAMI firms while financial services has shrunk to just 7.4% of the mix. Meanwhile, information, media, technology tenants account for 38% of all occupied office space in Midtown South and financial services accounts for 3.2%.

Average asking rent in the area is on the upswing, but it's still heavily discounted against other parts of Manhattan. The average asking rent Downtown increased .2% to $40.28 per square foot and the class-A asking rent totaled $45.36 per square foot, which is up .3% year-over-year.

Pricing also is working in favor of the Midtown market, said Jared Horowitz, executive director. “Competitively priced space has translated into positive absorption in Midtown for the first time in 15 months,” he said. The quarter closed with an average asking rent of $66.34 per square foot, which is down 0.5% year-over-year. The class-A asking rent closed at $71.66 per square foot, down 0.6 percent.

Unlike the Midtown South and Downtown markets, the Midtown market saw total leasing activity drop from a year ago, down 8.3 percent. Midtown closed with a vacancy rate of 10.1 percent. While new leasing activity in Midtown reached three million square feet at the end of the quarter, which is slightly lower than the 3.3 million square feet completed a year ago, class-A leasing increased 6% year-over-year.

There's continued strength in Manhattan's retail market, said Michael O'Neill, senior director. An area he noted in particular was SoHo, where there's been a clear spike in demand.

“The significant amount of recent leasing activity in the SoHo submarket has largely been driven by some of the world's most notable fashion and luxury brands,” said O'Neil. “These commitments have created three desirable co-tenancies, fueled increased demand, and resulted in a significant year-over-year increase in rent expectations.”

The average ground floor asking rent per square foot has increased 35% since last quarter, the largest increase of the 10 retail corridors that C&W tracks, he noted.

Also of interest is the fact that asking rents and availability rates have simultaneously increased in several submarkets including SoHo, Fifth Avenue, Madison Avenue, and the Meatpacking District. “That's because much of the inventory impacting these availability rates is the result of manufactured availabilities by new or existing property owners seeking to capitalize on the tremendous rental growth in these areas.The availabilities are manufactured as a result of property sales, early lease terminations, buyouts, and in the case of the Meatpacking District, new developments or redevelopments of properties.

On the capital markets front, Nat Rockett, EVP, discussed Manhattan sales volume, noting that diminished sales activity in the first quarter was due to an exceptional fourth quarter. Total sales volume in the first quarter came up relatively short at $3.3 billion, he noted, but when taking into account deals under contract and on the market, the amount of sales are on target to exceed the first half of 2012, he said.

Of particular note is the new trend of converting office space to super luxury condominiums—as is happening at the Sony Building, he said. “The Sony building is Class A, the fact that it's getting converted to apartments/hotel makes a statement. It raises the question, 'Is everything a conversion now?'” he noted. “If you can sell for $6,000 to $7,000 per-square-foot, the answer is yes.”