2002 brought no relief from the deterioration of market conditions that has characterized the past 18 months. Availability rates rose in all three Manhattan markets: from 10.8% to 11.1% in Midtown; from 13.4% to 14.2% in Midtown South; and from 14.2% to 15.9% in the Downtown market.

Net absorbtion continues negative as well in all three areas. The Midtown and Midtown South markets each lost approximately 880.000 square feet of tenancies. Downtown's loss equaled these two combined: 1.76 million square feet.

There are now 52.8 million square feet available in Manhattan's main business districts, 13.2 of total inventory. For the first time since the beginning of the current slump, more space was available for direct lease than for sublease entered in the marketplace. Direct lease availabilities increased 2.5 million square feet, to 34 million, while sublease space increased by 0.7 million square feet, to 18.8 million. The sublease sector now accounts for 35.6% of all availabilities, down sharply from the close of the First Quarter, when this figure stood at 57.5%.

The Downtown market continues to be the weakest of Manhattan's three business districts. At the end of 2000, it had 102.8 million square feet under lease. Since then, occupancy has plunged by 23 million square feet, far more than the 13.4 million squre feet that were destroyed at the World Trade Center, to 79.8 million square feet.