Office leasing in Manhattan in 2008 was 19.1 million square feet, the lowest level, according to a Cushman & Wakefield report issue today since 18.9 million square feet in 2001.

This year's leasing activity was down 19 percent from the 23.5 million square feet leased in 2007, the report maintained.

The slowdown in leasing brought available space to 31.1 million square feet, the highest level since May 2006 and 43 percent more than the 22.2 million square feet that were available at the end of 2007, according to the study.

"The majority of tenants in the market for office space have been employing a cautious 'wait and see' attitude," said Joseph Harbert, chief operating officer of Cushman & Wakefield's New York Metro Region. "As vacancy increases and rents begin to soften, activity has been driven by those tenants nearing lease expirations who have no choice but to make a decision, as well as those who see real value and opportunity in the market."

Midtown Manhattan's vacancy rate increased 2.3 percentage points year-over-year, reaching 8.5 percent at the end of 2008, the highest level since the third quarter of 2005 and the highest vacancy rate of the city's three major submarkets, the report said.

Space available for sublease in Manhattan climbed to 8.2 million square feet, up 132 percent from the 3.5 million square feet available for sublease at the end of 2007, it continued.

"After an enormous run up in pricing during 2007 and early 2008, asking rents throughout the city began to decline only during the last three months of 2008," the report maintained, adding that "Though only sublease asking rents charted a year-over-year decrease, quarterly declines for asking rents were the largest in at least 20 years. From the end of September to the end of December, overall asking rents for Manhattan declined $3.53 per square foot, or 4.8 percent; asking rents for space available directly from landlords declined $2.04 per square foot, or 2.7 percent; and asking rents for sublease space decreased $7.58 per square foot, or 10.7 percent."

"Based on this sharp quarterly decrease, we expect asking rents to continue to decline well into 2009, and 'taking deals' to reflect increased discounts to asking rents," said Mr. Harbert.

Annual investment sales activity for transactions $10 million and higher was at the lowest level in New York City since 2004, ending 2008 with approximately $19.2 billion in closed sales as compared with the record $47.8 billion in sales closed in 2007, the report said.

Foreign investors accounted for nearly 39 percent of all closed transactions, compared to 12 percent in 2007, the study said.

Asking rents for ground floor space on Madison Avenue declined $34 per square foot year-over-year, ending 2008 at $1,057 per square foot, the report said, while the luxury corridor's availability rate increased to 12.4 percent, up from 8.6 percent at the end of 2007. Activity on Manhattan's Fifth Avenue, the world's most expensive retail street, surged in 2008, it continued, with blockbuster deals including Gucci's lease to Diesel at 685 Fifth Avenue and Abercrombie's lease at 666 Fifth Avenue and asking rents continue to surpass $2,000 per square foot.