For the past 2 years as Real Estate Prices have fallen drastically all over the nation, Manhattan's still held strong (infact growing 5% or more last year for residential properties). Now with the Office Rents falling and job-cuts galore in all sectors of the Financial Capital of the World, we could see this once immune housing sector of NYC come sinking down like a rock.
Keep shorting housing stocks. 
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajMo97E3ZvS0&refer=home
Manhattan Office Rents Fall for First Time in Three Years
By David M. Levitt and Daniel Taub
June 27 (Bloomberg) -- Manhattan office rents fell 2.2 percent in the second quarter, the first decline in the most expensive U.S. office market since 2005, according to real estate broker Studley Inc.
The decline was 4.4 percent for Class A office space, according to a preliminary second-quarter New York market report by Studley, which represents tenants. The broker blamed a ``malaise' among Wall Street securities firms, which hadn't previously stopped the rise in rents, in a report by Steven Coutts, Studley's senior vice president for national research services. The full report will be released next week.
``We're really starting to see the culmination of what people have been expecting to occur since the fourth quarter of last year,' Coutts said in a telephone interview. ``It's the result of the whole chain of events, from the subprime to financial jobs being lost in the city. In some cases, it's starting to affect secondary industries. We're starting to see a slowdown in advertising and publishing.'
New York City's Independent Budget Office said in a report last month that it expects the city to lose 33,300 finance jobs, a decline of 7.1 percent from the peak in 2007. That would follow an industry loss of 52,500 jobs in New York during the 2000-to-2003 market drop.
More than 9,000 jobs are being eliminated at New York-based Bear Stearns Cos., acquired this month by JPMorgan Chase & Co. New York has lost 10,000 financial services jobs since last August, a 3.5 percent fall, according to the Bureau of Labor Statistics in Washington.
`Critical Catalyst'
An increase in space offered for sublease, which had been ``contained' before mid-March, ``was the critical catalyst that moved the market in the second quarter,' Studley said in the report. Manhattan's office availability rate rose to 8.2 percent in the second quarter, up from 7.3 percent a year earlier and the highest since the third quarter of 2005.
Sublet space available for rent was at a low of 6.2 million square feet (576,000 square meters) in mid-January, surged to 7.8 million square feet in late March, and reached 8.3 million square feet by the middle of this month. While the amount of space for sublet jumped by almost a third since mid-January, the new space available still is less than a third of what Manhattan tenants typically lease each quarter, Studley said.
A rising amount of space available for sublet can cut rental rates because landlords have to compete against tenants who would rather lease at a low price than lose money on empty space.
``A subletter will drop their price much more quickly than a landlord,' said Ruth Colp-Haber, a partner at Wharton Property Advisors, a New York-based tenant representation firm. ``A landlord needs to keep their rents high to justify their financing, to justify their whole existence.'
Big Blocks
The supply of ``big block' space, or contiguous areas of 50,000 square feet or more, has almost doubled since its low a year ago, Studley said. The big-block supply rose to 7.6 million square feet from 4.5 million square feet in midtown Manhattan, and to 6.5 million square feet from 2.9 million square feet downtown.
Those numbers ``understate the range of space that is actually available for lease,' because almost 3.5 million square feet of additional space that hasn't been being publicly marketed ``is rumored to be in play,' Coutts wrote.
Large landlords such as SL Green Realty Corp. and Vornado Realty Trust are likely protected against rent declines because their occupancy rates tend to be higher than the market average, and their tenants are on long-term leases, Coutts said.
Drop in Values
Declining rents will reduce the value of their properties, he said. New York office buildings have already lost 20 to 30 percent of what they were worth last year, Green Street Advisors said in a May 25 report.
``Even though they're not feeling the pain as far as rent roll right now, ultimately the value of the properties are affected because of the fact that the expectations of increased rent upon lease rollover are absolutely coming down,' Coutts said in the interview.
Shares of landlords with significant office holdings in Manhattan have declined this year. Boston Properties Inc. fell 1 percent through yesterday, Brookfield Properties Corp. is down 6 percent, SL Green declined 10 percent and Vornado dropped 0.3 percent.
Manhattan's office market may still feel further pain from additional job losses resulting from declines in the financial- services industry, he said.
``This downturn started in the financial sector, the heart of Manhattan's economy,' Coutts wrote in the report. ``Professional and business firms have just begun to feel the chill of the loss in revenues in the financial sector and will likely start to contract in the coming quarters.'
To contact the reporters on this story: David M. Levitt in New York at dlevitt@bloomberg.net; Daniel Taub in Los Angeles at dtaub@bloomberg.net.
Last Updated: June 27, 2008 10:56 EDT
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