Over the past couple of weeks we’ve had a heavy diet of bad news from Wall Street.  Not necessarily about the markets but about large institutions evaporating.  Many people are asking how this effects commercial real estate and, specifically, the leasing market.  Well, the simple answer is that it does have a rippling effect but its difficult to predict when it will show up in asking rates.

I saw a story recently about the large chunks of sublease space that could potentially come on the market in San Francisco if the investment banks scale back their presence here.  And today I read a story in Time about the “financial madness”.  This was one of my favorite excerpts:

For an example in our backyard, consider Lehman Brothers. Lehman was so flush, or at least felt so flush, that in May 2007 it sublet 12 prime midtown-Manhattan floors of the Time & Life Building — across the street from Lehman headquarters — from Time Inc., which publishes this magazine. Lehman signed on for $350 million over 10 years. (It’s not clear what kind of hit, if any, Time Inc. will now face.)

OUCH!

So, if job growth continues to slow and large blocks of space come back on the market, landlords will eventually feel the pressure to lower rates to compete for business.  Given that the leasing markets have been healthy over the last couple of years who knows exactly when we’ll see that happen.