New York City State of the Commercial Market

Yesterday NAI held our annual Global Market Report featuring Dr. Peter Linneman, Jeff Finn and myself. The text of my talk on the state of the New York office market is attached. Highlights include:

After several consecutive years of record investment activity, 2008 saw a drop of 60%.
On the leasing side, rents have dropped as much as $6.50 per sq ft in a 60 day period at year end 2008, and this is in spite of many owners leaving asking rents unchanged due to their perception that there would not be tenants to lease their space yet regardless of the rent.
Vacancy rate is up to over 7%, from 5.5% a year ago. But the availability rate, including both sublease and shadow space, is as high as 12-13% today by some accounts.
What is likely to happen next?
Rents need to hit bottom. This is in process and will happen within 12 months, maybe less.
Rent assumptions on investment deals can then begin to be formulated.
Leverage on investment deals will need to settle at traditional levels, 60-65%, with conservative rent growth assumptions. Income in place will be the basis for determining value, not the future income based on crazy growth assumptions.
Owners will need to take a longer view, invest in their properties and take care of their clients.
The quick flip based on cap rate compression is over, never to return (at least until the next cycle).
We are leaving the "new paradigm" everyone referred to in the run up, and heading into an "old paradigm"
Back to basic is what is needed as we get through this mess that has been created.

Where do you think your investment and leasing markets are today? Where will they be a year from now?
What markets will investors be looking at?