Lower Manhattan, the country’s best-performing office market, is struggling to hang on to its title as vacancies mount. Though the Financial District fared relatively well during the commercial property slide, demand is no longer keeping up with increasing inventory. Goldman Sachs, American International Group and Bank of America are among the major tenants relocating, which follows the flight of firms like Lehman Brothers after Sept. 11, 2001. Goldman Sachs is moving to its new West Street building and vacating 2 million square feet offices including 85 Broad Street and 1 New York Plaza. AIG last year sold its 70 Pine Street and 72 Wall Street headquarters. Bank of America, meanwhile, is moving its employees into a new Midtown tower at One Bryant Park, and it remains to be seen what will happen to the World Financial Center offices of Merrill Lynch, which it acquired last year. Cushman & Wakefield expects Lower Manhattan’s vacancy rate to hit 14 percent by late next year — the highest since 1997 — and the 4.4 million square feet of office space planned for the two new towers going up at the World Trade Center isn’t helping that metric. “The amount of space that’s potentially going to come to the market will increase availabilities and put pressure on pricing,” said Kenneth McCarthy, who heads New York-area research for Cushman & Wakefield. [Bloomberg]

State Sen. Daniel Squadron has criticized the FDIC’s decision to leave its home at 20 Exchange Place for the Empire State Building.

From the January issue: Resilient. That’s the word for Lower Manhattan’s commercial real estate
market for the past 12 months. In the aftermath of the greatest
financial meltdown in recent history, Lower Manhattan boasts the lowest
vacancy rate of any market in the city at 7.3 percent, according to CB
Richard Ellis data for November. Midtown and Midtown South had rates of
10.2 percent and 9.8 percent, respectively, in the same month. Sounds like good news, right?
Not so fast. There’s a looming cloud.
“In many instances it is always calm before the storm,” said Hal Stein,
who heads up Newmark Knight Frank’s Downtown office. “Here is the
issue: [In 2010] there is going to be substantial space hitting the
market from some of the financial firms and that is going to be a
telltale sign.”

Last year’s Bank of America merger with Merrill Lynch may have resulted in a tangle of litigation, but it also produced a flood of real estate investment banking profits that may have made it worth the headaches. In 2009, the bank used its relationships with borrowers to generate investment banking work and in doing so managed to pull way ahead of its competitors in underwriting stock offerings by commercial real estate firms. Refugees from Merrill stayed on hand to handle the booming caseload. This year, Bank of America is looking to help even more private real estate companies take the plunge into public markets. “We have lists of companies that we think are good candidates for the public market, and we’re proactively reaching out to them,” said Jeffrey Horowitz, head of Bank of America’s real estate investment banking division in the Americas, who was formerly with Merrill. According to SNL Financial, Bank of America is a lead lender to 53 Real Estate Investment Trusts, or REITs, which is more than any other bank, and according to Dealogic, it earned $208 million in fees from REIT equity offerings last year. JPMorgan Chase, in second place, earned a little more than half of that. [WSJ]

It appears that Bank of America is taking its substantial third-quarter losses to heart. Yesterday, before the bank revealed its quarterly earnings — a $1 billion loss before accounting for dividends to preferred shareholders — the bank announced that CEO Ken Lewis, who will step down at the year’s close, would forego his 2009 paycheck. Today, the New York Observer revealed that the bank has also sold its luxe corporate apartment at the Time Warner Center for $7.2 million. The company bought the 57th floor condo for $6.35 million in 2006, and it was there that the infamous Bank of America-Merrill Lynch merger was reportedly first discussed. City records show the buyer as Tata Real Property, though it was not clear whether the apartment had ever been listed on the market. [NYO] and [NYT]